Detailed Narrative
Q2 CY25 Performance Overview
Huhtamaki India experienced a mixed Q2 CY25, with demand remaining subdued due to a slow recovery in urban areas and typical rural consumption patterns. The quarter also faced headwinds from unseasonal rains, an early monsoon, and inflationary pressures. Despite these challenges, the company's strategic cost control measures and efforts to improve product mix helped deliver strong profitability, even as net sales declined.
Financial Highlights: Profitability Amidst Revenue Decline
For Q2 CY25, net sales stood at ₹5.9 billion, a 4.7% YoY decrease, and were nearly flat QoQ. However, EBITDA saw a robust 28.7% YoY growth, reaching ₹493 million, though marginally lower by 1% QoQ. EBIT also grew significantly by 37.4% YoY to ₹362 million. Profit Before Tax (excluding exceptional item📎s) increased by 55% YoY to ₹331 million, despite a slight QoQ dip of 2.7%. Net profit after exceptional item📎s and taxes was ₹249 million, with EPS at ₹3.30 for the quarter.
Strategic Focus on Operational Excellence and Sustainability
The company continues to emphasize operational efficiencies through its World Class Operations (WCO) Program. Significant improvements in safety records were noted, with reduced incident rates and fire ignition points. Huhtamaki India is also committed to sustainability, expecting to sign SBTi targets in 2025 aligned with 2023 goals for Scope 1 and Scope 2 reductions, and is pursuing projects for electrical power reduction, water conservation, and waste reduction.
Market Dynamics and Product Strategy
The market signals were mixed, with smaller players gaining traction in Q1 2025, impacting larger FMCG companies and, consequently, Huhtamaki. The company is focusing on high-value business and product mix improvement. Its 'blueloop' segment contributes 27-30% of revenue. The company is also leveraging its global presence and capabilities to offer future-ready and sustainable packaging solutions, including mono-polymer, polyolefin, and paper-based options, and sees pet food as a growing opportunity.
Working Capital and Debt Management
The company's debt-to-equity ratio remains comfortable, with the External Commercial Borrowing (ECB) of ₹1 billion being the sole debt, due for repayment in 2027. Finance costs declined 39% YoY due to partial ECB retirement. However, the working capital position as of June 2025 was less favorable compared to previous periods, primarily driven by an increase in inventory and receivables. Management acknowledged high inventory levels (₹310 crores) and aims to achieve a 'decent inventory level' by year-end.