Hindustan Foods reports Q1FY21 Results

Hindustan Foods Limited, India's most diversified contract manufacturers of FMCG, announced their unaudited financial results, for the first quarter ending 30th June, 2020.

Key Consolidated Financial Highlights are as follows:

- Gross Revenues grew by 40% from Rs 144.70 crores in Q1FY20 to Rs 202.33 crores in Q1FY21
- EBITDA grew by 33% from Rs 11.30 crores in Q1FY20 to Rs 15.04 crores in Q1FY21
- PBT was Rs 6.58 crores in Q1FY21 as compared to Rs. 6.53 crores in Q1FY20

Operational Highlights

- The CoVID situation led to less than optimal capacity utilization of the factories
- This was especially magnified due to the increased capacities which came on line in Q4FY20
- This loss of sales resulted in under-recovery of depreciation and interest costs
- The factories stabilized production from May end and continue to perform at higher than pre-CoVID levels currently

Strategic Highlights

- The company has entered into a long term contract to manufacture a leading brand of toilet cleaner for its upcoming facility in Silvassa

- The Board has sanctioned a further investment of Rs. 150 crores in Hyderabad on the back of the successful commercialization of the liquid facility

- The merger of the Mysuru and Coimbatore facility is on track

- The company has incorporated a wholly owned subsidiary company to leverage further manufacturing opportunities.

Commenting on the results, Mr Sameer R. Kothari, Managing Director said, "Hindustan Foods Limited dedicates the First Quarter of 2020-21 to the fantastic set of people who have fought at the frontlines of the CoVID-19 battle with scant recognition. It has been a quarter which truly tested the capabilities and competencies of the Company. The performance of the Company was affected by lockdown, the reverse migration of labour, the unavailability of trucks, the shutdown of the up-stream factories and a resultant lack of raw and packing materials. While most of the products manufactured by the company fell in the category of "Essential Products", the coordination with various government authorities and the differing understanding of the rules and regulations in various states lead to major challenge in starting up the facilities.

Some of the plants started operations in April itself but were hampered by various issues leading to sub-optimal capacity utilization with production stabilizing only in May and June. The team did a fantastic job in the face of adversity and managed to bring all the factories to the pre-CoVID levels by May end.

In times like this, the management needs to take a call about safeguarding the sometimes conflicting interests of various stakeholders in the Company. The Board and I decided that we would first and foremost ensure that we are able to service our customers (irrespective of the costs) and then safeguard our employees who were at the frontline of this pandemic working to ensure that the company is able to deliver the essential products. I am happy to say that no employee faced a pay cut and we were able to retain all the employees without any layoffs. These choices obviously meant that we would have to sacrifice some profits especially in a quarter where we had hoped to post the highest ever profit figures on the back of the increased capacities. We decided that maintaining our credibility with our customers and employees would eventually result in value creation for our shareholders in the long run.

The Company did not exercise the option of moratorium and continued to pay the EMIs leading to a further strengthening of our relationship with our bankers who I believe will be more confident to support us in our future projects.

Coming to the present times, I am pleased to confirm that we are on track to have record turnover in the second quarter. This has been aided by an increased demand for home and hygiene products in our factory in Hyderabad and also an increase in the demand for household insecticides in our factory in Jammu. The company had started a project in Silvassa to build a home care facility and I am pleased to inform that we have signed an agreement with a leading brand of toilet cleaner for the entire capacity. Though this project was delayed due to the CoVID lockdown, we are expecting to start commercial production from next month.

In today's meeting, the Board reviewed the performance of the new investment in the liquid project in Hyderabad which turned out to be timely due to the increase in the demand for home and personal hygiene products. The Board was also pleased to sanction an additional investment of Rs. 150 crores at Hyderabad for further increasing the capacity. This would take the total investment in Hyderabad to nearly Rs. 400 crores. This investment would be funded by internal accruals and debt. The pandemic has further reinforced our strategy for decentralized manufacturing and also proven the benefits of contract manufacturing. On the back of this vision, we have invested more than Rs. 300 crores in the last 2 years and with the upcoming investment of Rs. 150 crores, our goal for FY2022 continues to be a topline of Rs. 2,000 crores of turnover.

In tune with the current situation, the Company redirected its CSR contribution to the PM Cares fund as well as the CM Relief Fund. On on-going basis, we will keep our focus on the health and hygiene of the Girl child".

Shares of HINDUSTAN FOODS LTD. was last trading in BSE at Rs.769.75 as compared to the previous close of Rs. 771.95. The total number of shares traded during the day was 7333 in over 466 trades.

The stock hit an intraday high of Rs. 805 and intraday low of 735.1. The net turnover during the day was Rs. 5688040.

Source : Equity Bulls

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