Orient Bell

Orient Bell reported net sales of INR142.5 crores for Q1 FY26, a 3% decrease from INR147.3 crores in the previous year's corresponding quarter. This decline was primarily attributed to increased trade discounting, which led to a lower Average Selling Price (ASP), despite volumes being almost maintained year-on-year. Despite the revenue pressure, the company successfully improved its gross margins by 50 basis points to 36.5% and EBITDA margins by 60 basis points over last year, reaching INR5.6 crores for the quarter. The cash conversion cycle also saw an improvement, reducing to 33 days from 35 days in Q1 last year, with net debt remaining stable at INR9.5 crores.

The overall demand environment remained subdued in Q1 FY26, influenced by heightened competition, ongoing government projects, gas costs, geopolitical factors, and tariff wars. Management noted that exports, which typically account for 7-8% of Indian tile exports to the US, were still below FY'25 levels, with pessimism increasing from July due to fuel tariff wars and uncertainty. The company acknowledged that the real estate sector's strength did not fully translate into tile demand, as other building and construction industries were not performing well, leading to a sluggish overall market.

Despite the challenging demand, Orient Bell maintained a strong focus on cost savings and operational efficiency. The improvement in gross and EBITDA margins was driven by frugal manufacturing practices and tight control over wastage and costs. The company's product mix continued to evolve, with the vitrified segment gaining 2% over last year to reach 58% of total sales, and GVT salience increasing by 1.6% to 40.1%, aligning with industry peers. Current capacity utilization stood at approximately 60% in Q1 FY26, with management expecting further margin improvements as utilization increases.

Orient Bell continued to invest in strategic initiatives aimed at enhancing the customer buying experience and strengthening its brand. Key initiatives included the launch of an AI-based visualization tool, which garnered over 1 million views on Instagram and doubled usage in activated shops. The company also restructured its Orient Bell Tile Boutiques (OBTB) operations under two national heads to drive display upgradation and influencer services across its 385 boutiques. Investments in brand building and TV campaigns in core markets like North, East, and Tamil Nadu are ongoing to improve brand awareness scores.

Management described the current industry period as 'very slow,' possibly the slowest in the last 7-8 years. The Morbi region, a significant tile manufacturing hub, is experiencing distress, with approximately 39 units taking shutdowns in the last three months and some facing NPA issues. This consolidation, coupled with a slowdown in new capacity additions, is viewed as a midterm positive for the industry. While demand was sluggish in Q1, management anticipates a potential pick-up in Q2 and Q3, as tiles typically see demand later in the building and construction cycle.

Orient Bell announced the appointment of Mr. Anuj Arora as the new Chief Financial Officer (CFO), who will be based at the corporate office in Delhi. Mr. Arora brings over 23 years of diverse industry experience across manufacturing, retail, and hospitality sectors. While his specific strategic priorities were not discussed during this call, management indicated that these would be elaborated upon in the next quarter, signaling a focus on process improvements and controls to drive sustained growth.