Trident Limited — Q1 FY21 earnings call

Call held 18 Jul 2020

Management summary

Trident Limited's Q1 FY21 performance was significantly impacted by the COVID-19 lockdown, leading to a substantial decline in revenue and profit. Despite the challenging environment, the company demonstrated strong financial discipline by reducing net debt by INR 369 crores and optimizing fixed costs. The textile segment showed resilience with increased export contribution and Q-o-Q growth in Bed Linen revenue, while the paper segment faced muted demand. The company is actively reviewing capex projects and focusing on new product categories like anti-viral textiles and kraft paper.

Highlights

  • Net Revenue for Q1 FY21 stood at INR 713.4 crores, a 45.7% YoY decrease from INR 1313.1 crores in Q1 FY20.

  • Profit after tax for Q1 FY21 was INR 10.1 crores, representing a 92% decrease compared to Q1 FY20.

  • EBITDA for the quarter was INR 118.7 crores, translating to a 16.6% margin.

  • Net Debt significantly reduced by INR 369 crores during the quarter to INR 1244.5 crores as of June 30, 2020, down from INR 1614.5 crores on March 31, 2020.

  • Net Debt to Equity ratio stood at 0.4x.

  • Exports contributed 74% to overall revenue, an 11% growth over Q4 FY20.

  • Bed Linen segment revenue grew by 37% Q-o-Q despite lower volumes, driven by a better product mix.

  • The company has a capability to produce 10,000 PPE's per day for the domestic market.

Concerns

  • COVID-19 pandemic and its impact on operations and market demand

Key financials

  1. Net Revenue ₹713.4 Cr -45.7%YoY
  2. EBITDA ₹118.7 Cr
  3. EBITDA Margin 16.6%
  4. PAT ₹10.1 Cr -92%YoY
  5. Finance Cost ₹23.1 Cr -28.9%YoY
  6. Net Debt ₹1,244.5 Cr -22.9%QoQ
  7. Net Debt to Equity Ratio 0.4×

What they filed

Q1 FY27: revenue up 4.8%, net profit up 10.1% against the same quarter last year.

₹ Cr · quarterly
Line itemQ2 FY25Q3 FY25Q4 FY25Q1 FY26Q2 FY26Q3 FY26Q4 FY26Q1 FY27
Revenue1,709 1,663 1,859 1,700 1,785 +4%1,566 −6%1,630 −12%1,782 +5%
EBITDA225 210 243 290 213 −5%135 −36%229 −6%292 +1%
Net profit83 78 132 139 92 +11%42 −46%102 −23%153 +10%
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.

Segment breakdown

Share of Revenue
₹708 Cr Total
  • Textile Segment ₹585.7 Cr 82.7%
  • Paper & Chemicals Segment ₹122.3 Cr 17.3%

Guidance & targets

Capacity

  • PPE Production Capacity Capacity · per day · High confidence 10,000 PPE's
    We have the capability to produce 10,000 PPE's per day.

    — Management

Revenue

  • Textile Segment Revenue & Capacity Utilization Revenue · remaining quarters (FY21) · Low confidence improved capacity utilizations & revenues as compared to previous year
    However the company is hopeful of achieving improved capacity utilizations & revenues as compared to previous year in the remaining quarters provided no adverse impact of Covid-19 in the geographies we operate in.

    — Management

Debt

  • Net Debt Status Debt · future · Low confidence net debt free
    What has been the company's efforts to reduce its debt commitments and become net debt free in future?

    — Management

Realization

  • Average Negotiated USD/INR Rate Realization · Q1 FY21 · High confidence INR 72.95
    Our average negotiated rate for the current quarter has been at INR 72.95 per USD

    — Management

Hedging

  • Average Forward Hedged Rate Hedging · FY21 · High confidence INR 74.13
    Average Forward Hedged Rate for FY21 is around INR 74.13 per USD.

    — Management

Hedging Strategy

  • Terry Towel Division Hedging Hedging Strategy · monthly rolling basis · High confidence 40%-60% of sales replenishment
    Terry Towel Division: Hedging is done on monthly rolling basis at 40%-60% of sales replenishment.

    — Management

  • Yarn/Paper Division Hedging Hedging Strategy · whenever any order is confirmed · High confidence order to order basis
    Yarn/ Paper division: Hedging is done on order to order basis. Whenever any order is confirmed, it is hedged by forward cover.

    — Management

Paper Segment

  • Volumes and Realizations Paper Segment · going forward · Medium confidence remain muted
    We expect the volumes as well as realizations to remain muted going forward

    — Management

Cotton Prices

  • Cotton Prices Cotton Prices · going forward · Medium confidence remain near the current levels
    We expect cotton prices to remain near the current levels going forward

    — Management

Risks & concerns

  • COVID-19 pandemic and its impact on operations and market demand

    high

    COVID-19 has impacted normal business operations, production, supply chain, and market volatility, leading to significant revenue and PAT decrease.

    Management acknowledged

  • Geopolitical factors (Indo-China relationship, US elections)

    medium

    Indo-China relationship and US elections may impact the future outlook for the industry.

    Management acknowledged

  • Increased imports from China and pricing pressure in the paper industry

    medium

    Growing imports from China (14% increase in last financial year) have impacted demand and created pricing pressure for domestic paper manufacturers.

    Management acknowledged

  • Muted demand and realizations in the paper segment

    medium

    Delay in academic sessions, shift to online mode, and reduced office staff have resulted in reduced demand for copier paper, leading to muted volumes and realizations.

    Management acknowledged

  • Review of ongoing capex projects due to COVID-19

    medium

    Yarn Manufacturing units and Paper Upgradation projects are being reviewed, and the implementation schedule and viability are being reassessed.

    Management acknowledged

Q&A highlights

3 direct
Capacity utilization and revenue guidance for Textile Segment for FY21 Direct
However the company is hopeful of achieving improved capacity utilizations & revenues as compared to previous year in the remaining quarters provided no adverse impact of Covid-19 in the geographies we operate in.

This question addresses the immediate outlook for the core textile business, highlighting the dependency on the evolving COVID-19 situation.

Company's efforts to reduce debt commitments and become net debt free in future Direct
During the quarter, the company has paid its interest/ instalments commitments due as on 30th June 2020 as well as prepaid few of its high cost term loans amounting to INR 140 crores. Owing to the above initiatives the debt levels of the company have reduced by INR 369 Crores during the current quarter to level of INR 1245 Crores at end of Q1 FY21.

Debt reduction is a key strategic priority for the company, and this response details specific actions and significant progress made in Q1 FY21.

Current status of capex projects being undertaken by the company Direct
The capex project being undertaken by the company before the Covid-19 was Yarn Manufacturing units and Paper Upgradation project which are currently being reviewed owing to Covid-19 situation. The company is reassessing the implementation schedule and viability in view of the changed economic scenario.

This reveals a potential slowdown or re-evaluation of growth-related investments due to the pandemic, which is crucial for future capacity and growth projections.

2 min read 6 chapters

Detailed narrative

Q1 FY21 Financial Performance & COVID-19 Impact

Trident Limited reported a significant decline in its Q1 FY21 financials, with Net Revenue falling by 45.7% YoY to INR 713.4 crores and Profit After Tax decreasing by 92% to INR 10.1 crores. This downturn was primarily attributed to the COVID-19 lockdown, which led to production interruptions, supply chain disruptions, and market volatility. Despite the challenges, the company's EBITDA margin stood at a healthy 16.6% (INR 118.7 crores), reflecting some operational resilience.

Debt Reduction Initiatives

The company made substantial progress in debt reduction during the quarter, with Net Debt decreasing by INR 369 crores to INR 1244.5 crores as of June 30, 2020, from INR 1614.5 crores on March 31, 2020. This was achieved through prepayment of INR 140 crores of high-cost non-TUFS term loans and other measures. The Net Debt to Equity ratio improved to 0.4x, demonstrating strong financial management and a commitment to becoming net debt-free in the future.

Textile Segment Performance & Outlook

The Textile segment's revenue for Q1 FY21 was INR 585.7 crores, with EBIT at INR 13.1 crores. Exports played a crucial role, contributing 74% to overall revenue and growing 11% over Q4 FY20. The Bed Linen segment showed a 37% Q-o-Q revenue growth, driven by a better product mix despite lower volumes. The company is hopeful of achieving improved capacity utilizations and revenues in the remaining quarters, contingent on the COVID-19 situation.

Paper & Chemicals Segment Performance & Outlook

The Paper & Chemicals segment recorded revenue of INR 122.3 crores and EBIT of INR 33.7 crores in Q1 FY21. The segment was severely impacted by the pandemic, with reduced demand due to delayed academic sessions and the shift to online learning. Growing imports from China, which increased by 14% in the last financial year, also created pricing pressure. Management expects volumes and realizations for this segment to remain muted going forward, but is diversifying its product mix by offering kraft paper.

Cost Optimization & New Product Development

Trident implemented several initiatives to optimize fixed costs, including utilizing internal accruals, introducing productivity-linked variable pay, and automating processes. In response to changing market demands, the company introduced anti-microbial treatment as a standard offering for Bath Linen and developed anti-viral products. It also established an e-commerce vertical and has the capability to produce 10,000 PPEs per day for the domestic market, venturing into this new category in early April.

Cotton Outlook & Raw Material Strategy

Cotton sowing has doubled compared to last year, with nearly 92 lakh hectares under cultivation, and is expected to cross 115-120 lakh hectares for the 2020-21 season. The Centre has raised the Minimum Support Price (MSP) for medium staple cotton to Rs 5,515 per quintal and long staple cotton to Rs 5,825 per quintal. Management expects cotton prices to remain near current levels going forward, with the existing cotton stock shifting the cover period for textile players by 1-2 months.

This is an AI-generated summary of a publicly available earnings call transcript.
View original transcript

More Textiles earnings calls