Huhtamaki India Limited — Q4 FY25 earnings call

Call held 25 Apr 2025

Management summary

Huhtamaki India reported a challenging Q1 CY25 with lower volumes and flat revenues amidst subdued market conditions. However, the company demonstrated strong operational resilience, achieving a significant 55.3% sequential increase in EBITDA to INR 49.7 crores, driven by an improved sales mix and efficiency measures. Profitability indicators like PBT and Net Profit also saw substantial quarter-on-quarter improvements, while maintaining a healthy liquidity position.

Highlights

  • EBITDA increased 55.3% QoQ to INR 49.7 crores from INR 32 crores.

  • Net Profit grew 123% QoQ to INR 26.1 crores from INR 11.7 crores.

  • Debt-to-EBITDA ratio improved to 2.1 in March 2025 from 3.2 in December 2024.

  • Gross margins improved considerably QoQ, driven by a better sales mix and efficiency push.

  • Liquidity position is strong with healthy debt-equity ratio of 0.1 and sizable unutilized credit lines.

Concerns

  • Q1 volumes were lower both year-on-year and quarter-on-quarter.

  • Revenues were almost flat YoY and slightly lower QoQ by approximately 1%.

  • Consumption patterns remain subdued, and urban demand is yet to pick up in India.

  • EBIT declined 7% YoY to INR 37 crores from INR 39.8 crores.

Key financials

  1. Revenue ₹593 Cr 0%YoY
  2. EBITDA ₹49.7 Cr +0.6%YoY
  3. EBIT ₹37 Cr -7%YoY
  4. PBT (before exceptional) ₹34 Cr -2.8%YoY
  5. Net Profit ₹26.1 Cr +0.4%YoY
  6. EPS (after exceptional) ₹3.47

What they filed

Q1 FY27: revenue up 22.5%, net profit up 76.0% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue652 619 610 612 625 −4%623 +1%613 +0%750 +23%
EBITDA18 26 39 43 55 +206%54 +108%40 +3%75 +74%
Net profit12 12 26 25 37 +208%30 +150%26 +0%44 +76%
How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence
  • Debt Gross ₹100 Cr · 2.1× EBITDA
    Debt-equity ratio is very healthy at 0.1, in line with what we have in December '24 quarter and debt-to-EBITDA ratio at March at 2.1 compared to 3.2 end of December quarter.
  • Liquidity Liquidity disclosed Overall liquidity remains strong, and we do have sizable credit lines unutilized. So liquidity is not a challenge.
    Overall liquidity remains strong, and we do have sizable credit lines unutilized. So liquidity is not a challenge.

Guidance & targets

Market Share

  • Sales from Blueloop products Market Share · by 2030 · High confidence 100%
    our company's target till 2030 is to be 100% sales from the blueloop, okay?

    — Rohan, Analyst

Revenue

  • Export vs Domestic Sales Mix Revenue · ongoing · High confidence 70-30 or one-third, two-third
    typically, we are into the range of 70-30 or kind of one-third, two-third kind of ratio we have. And we don't see any risk or we don't see any challenge, and we feel that we'll continue to maintain our ratios into that range, 70-30 or one-third, two-third kind of that.

    — Jagdish Agarwal, Executive Director and CFO

What to watch in Q1 FY26

Volume growth recovery

Next quarter / short to medium term
Current Lower YoY and QoQ
Target Improvement, especially in urban demand

Why it matters

Volume recovery is crucial for top-line growth and leveraging operational efficiencies.

So we believe that the situation probably should improve, the urban demand should come back, and it might take some time, but I think the expectation is that consumption should come back.

Risks & concerns

  • Subdued Consumption & Urban Demand

    high

    Muted consumer sentiments and slow urban demand are leading to lower volumes and challenging market conditions.

    Management acknowledged

  • Market Competitiveness & Cost Pressure

    medium

    Intense market competition and cost pressures from customers (including MNCs) are impacting margins and driving focus on efficiency.

    Both acknowledged

  • Slow Adaptation of Sustainable Products

    medium

    Despite being first to market with 'blueloop' products, the overall ecosystem for sustainable packaging is still evolving, leading to slower adaptation by customers.

    Management acknowledged

Q&A highlights

6 direct
Reasons for 450 bps increase in gross margin and sustainability Direct
So one is that we have talked about that we are focusing on the right portfolio mix... Second, we keep talking about efficiency measures. We are working to improve into all aspects of our cost side and all. So it is a combination of many things, portfolio, the improvement into operational efficiencies, the cost and all. So it's a cumulative impact.

Explains the drivers behind the significant margin improvement this quarter, indicating a strategic shift towards a better sales mix and efficiency.

Asked by Deepan Narayanan

Contribution of 'blueloop' products to margins and future expectations Partial
So you talk about the blueloop per se. I mean any product which is comes into sustainable category, we call that more of a blueloop. And if you look at we normally range between 27% to 30%, 31% kind of a range. When we talk about very specifically where we had investments into Silvassa, I think we are also making progress on that. But at this point, we talk about the whole baskets of all sustainable products putting together.

Clarifies the definition of 'blueloop' and current contribution range (27-31% of sales), but management avoids giving specific future margin impact, stating it's too early.

Asked by Deepan Narayanan

Expansion into non-FMCG items (e.g., stationery, electrical equipment) Direct
So -- but yes, in the industrial area, we keep on examining and exploring the better opportunities to service our customers. So -- but at this moment, we would be really focusing on the 5 core areas, foods, beverage, home, healthcare and industrial product sectors.

Defines the company's core focus areas and clarifies that non-FMCG items like stationery are not core, but industrial sector opportunities are explored.

Asked by Rohan

Comparison of Huhtamaki's margins with BOPP/Bopet film manufacturers and differentiation Direct
So as compared to the only pure-play film manufacturers, definitely, our margins will be slightly better... they are basically only specifically film manufacturers, whereas Huhtamaki not only manufactures our own film in certain areas, complex and where the quality requirements are significantly higher. But we are actually a complex organization. We are into the next activities of printing. So it's not an apple-to-apple comparison per se.

Explains Huhtamaki's more complex product offering and integrated operations, justifying potentially better margins compared to pure-play film manufacturers.

Asked by Saket Kapoor

Long-term strategy for profitable growth and market share, given past margin decline and current focus on profitability Direct
But when we talk about, we always maintain one really clear stand that our strategy is to grow the profitable core. And we'll continue to look for opportunities which make sense for us, which will help us to improve both top line and bottom line.

Clarifies the company's consistent strategy of focusing on 'profitable core' growth, addressing analyst's perception of shifting priorities.

Asked by Saurabh

Why margins declined over the past 5 years and what it will take to reach 10-11% margin again Partial
So I'll take this. So I think instead of discussing specifics, I think the key to go back to that margins is basically drive the innovative and differentiated products. And I think we spoke about blueloop, which is a sustainable product portfolio.

Addresses historical margin compression and reiterates the strategy of focusing on innovative, differentiated, and sustainable products (blueloop) to improve profitability, without committing to a specific margin percentage or timeline.

Asked by Madhur Rathi

Contribution of sustainable/blueloop packaging to sales mix and its margin impact Direct
It is in the range of 27% to 30% and more or less similar, the same range we had in December versus more or less very close to what we have in March.

Confirms the current sales mix from sustainable products (27-31%) but avoids quantifying the specific margin contribution, consistent with earlier responses.

Asked by Amit Kumar

Sales decline from CY22 (INR 3000 crores) to CY23 (INR 2500 crores) and plans for sales volume/revenue increase Direct
So 2022 was a year of a super inflation. The commodity prices were skyrocketing and all... So in 2022, one of the reasons that we have very high revenue was that we have super inflation in 2022. So that was one of the reasons.

Explains the high revenue in 2022 as an effect of super inflation, clarifying that the subsequent stabilization at INR 2500 crores is not necessarily a 'deterioration' in real terms, and reiterates focus on profitable, sustainable growth and right portfolio mix.

Asked by Prabhu Teli

2 min read 7 chapters

Detailed narrative

Q1 CY25 Performance Overview

Huhtamaki India reported Q1 CY25 revenues of INR 593 crores, remaining flat year-on-year but slightly lower by approximately 1% quarter-on-quarter. Despite challenging market conditions and subdued consumer sentiments, the company achieved a significant 55.3% sequential increase in EBITDA to INR 49.7 crores, up from INR 32 crores in Q4 CY24. This improvement was primarily driven by a better sales mix and enhanced operational efficiencies.

Profitability and Margins

The company's profitability saw a notable uplift, with PBT before exceptional items rising to INR 34 crores from INR 15 crores in the previous quarter, and net profit reaching INR 26.1 crores, up from INR 11.7 crores. Earnings per share (EPS) stood at INR 3.47. Management attributed the margin expansion to a strategic focus on a more profitable portfolio mix and continuous efficiency drives across all cost aspects, including productivity and cost control.

Market Challenges and Volume Trends

Management highlighted a 'challenging and volatile market environment' with 'muted consumer sentiments' and urban demand yet to pick up. This resulted in Q1 volumes being lower both year-on-year and quarter-on-quarter. The overall consumption scenario was described as 'not great,' with expectations for urban demand to recover in the future, though it might take some time.

Sustainable Packaging (Blueloop) Strategy

The company is committed to its 'blueloop' initiative, aiming for 100% sales from sustainable products by 2030. Currently, sustainable products contribute between 27% to 31% of the sales mix. While the ecosystem for sustainable packaging is still evolving, leading to slower adaptation, management expressed confidence in the long-term potential and benefits of being a first-mover. However, specific numerical margin impacts from blueloop were not disclosed, with management stating it's too early to quantify.

Efficiency Measures and Cost Control

Huhtamaki India is actively implementing efficiency measures across all operational aspects, including cost control, supplier management, and internal operating expenses. These initiatives, part of a 'world-class operations umbrella,' are aimed at improving productivity and overall cost structure. The company is also investing in digitalization and IT infrastructure, which are expected to contribute to long-term cost improvements and better employee cost efficiency.

Financial Health and Liquidity

The company maintains a strong financial position with a healthy debt-equity ratio of 0.1 and a debt-to-EBITDA ratio of 2.1 as of March 2025, significantly improved from 3.2 in December 2024. The balance sheet includes an ECB of INR 100 crores, and surplus cash is invested in secured instruments yielding over 7%. Liquidity remains robust with sizable unutilized credit lines, indicating no challenge in this area.

Competitive Landscape and Product Differentiation

Management clarified that Huhtamaki India's product portfolio is more complex than pure-play film manufacturers, incorporating Bopet, BOPP, TE, and aluminum foil, and includes printing activities. This differentiation allows for potentially better margins compared to simpler film producers and positions the company as a comprehensive packaging solution provider, rather than an 'apple-to-apple' comparison.

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