Earnings Call Transcript Analysis Report #
Financial Performance #
- Key Financial Metrics: Revenue, Profit Before Tax (PBT), raw material costs (fish meal, soybean meal, wheat flour), sales volume (metric tons), and freight costs.
- Comparisons:
- Consolidated Q3 FY25 vs. Q2 FY25: Gross income increased to INR 1,405 crores from INR 1,397 crores. PBT increased to INR 184 crores from INR 162 crores.
- Consolidated Q3 FY25 vs. Q3 FY24: Gross income increased to INR 1,405 crores from INR 1,287 crores (9.17% increase). PBT increased to INR 184 crores from INR 116 crores (59% increase).
- Consolidated 9 Months FY25 vs 9 Months FY24: Total Income Increased to INR 4,343 Crores From INR 4,185 crores. PBT increased to INR 526 Crores from INR 386 crores.
- Feed Division Q3 FY25 vs. Q2 FY25: Gross income decreased to INR 1,077 crores from INR 1,118 crores. PBT increased to INR 166 crores from INR 145 crores.
- Feed Division Q3 FY25 vs. Q3 FY24: Gross income increased to INR 1,077 crores from INR 958 crores. PBT increased to INR 166 crores from INR 76 crores (118% increase).
- Feed division 9 Months FY25 vs 9 Months FY24:Total Income Increased to INR 3,493 crores from INR 3,373 crores. PBT increased to INR 465 Crores from INR 288 crores.
- Shrimp Processing Q3 FY25 vs. Q2 FY25: Gross income increased to INR 328 crores from INR 284 crores. PBT decreased to INR 18 crores from INR 23 crores.
- Shrimp Processing Q3 FY25 vs. Q3 FY24: Gross income decreased to INR 328 crores from INR 330 crores. PBT decreased to INR 18 crores from INR 40 crores.
- Shrimp Processing 9 Months FY25 vs. 9 Months FY24: Gross Income was INR 855 crores as Compared to INR 820 Crores. PBT is INR 68 Crores as Compared to INR 104 crores.
- Revised Guidance/Forecasts: Shrimp exports during FY25 are estimated to be around 15,000 MTs.
- Growth/Decline: Consolidated and Feed Division revenues and PBT show growth year-over-year and quarter-over-quarter. Shrimp Processing division shows mixed results, with revenue increasing quarter-over-quarter but decreasing year-over-year, and PBT decreasing in both comparisons.
Strategic Initiatives & Business Updates #
- Major Strategic Announcements: Commencement of trading in cat food from January 2025. Plans to expand pet food reach across the country.
- New Products/Services/Markets: Launched cat food under the “Avant Furst” brand, available in Mumbai, Pune, Chennai, Bangalore, and Hyderabad. Planning to launch dog food by July 2025. Plans to import pet food from Bluefalo, Thailand. Exploring Middle East markets for feed exports.
- Operational Changes: Scaling up production at shrimp processing facilities.
- Ongoing/Completed Projects: Planning for a pet food manufacturing facility in Hyderabad is in progress. Trails of fish feed from Thai Union Feed Mill Limited are ongoing.
Market & Competitive Landscape #
- Industry Trends: The aquaculture industry was expected to face challenges in shrimp production and global demand, favorable climate conditions extend the shrimp-growing season. There’s an increase in demand for value-added shrimp products globally.
- Competitive Positioning: Avanti Feeds is focusing on value-added products to improve margins, where there’s less competition.
- Market Challenges/Opportunities: The global market for shrimp is expected to be stable with a potential 5% increase. The Indian pet food market is growing at a 20% CAGR.
- Market Share/Positioning: Avanti Feeds aims to increase feed exports to 10% of total feed sales in the next 3-5 years, from the current 1-2%.
Risk Factors & Challenges #
- Concerns/Challenges: Raw material price fluctuations (especially wheat flour), impact of Countervailing Duty (CVD) on shrimp exports to the U.S, Climatic changes affecting shrimp culture.
- Regulatory Issues: CVD of 5.77% imposed by the U.S. on shrimp exports. Reduction of custom duty on feed import is seen as a disadvantage.
- Supply Chain/Operational Constraints: Ocean freight rates impact profitability in the shrimp processing division. Labor-intensive nature of shrimp processing requires scaling up and training.
- Market Uncertainties: Fish meal prices are dependent on fish catches and export markets. Wheat flour prices are dependent on government policies.
Forward-Looking Statements #
- Outlook/Projections: Expecting shrimp production to be stable or slightly higher (5%) than the previous year. Global shrimp market expected to be stable with a marginal increase (5%). Expecting Fish meal prices to be around 95 to 100 INR.
- Commitments/Targets: Aims to complete the pet food plant by the end of December 2026. Targeting 80% capacity utilization in shrimp processing in the next 4-5 quarters.
- Planned Investments/Priorities: Investment in pet food manufacturing facilities.
- Future Performance Sentiments:Expects positive trend for the first crop of shrimp production.
Q&A Insights #
- Pressing Analyst Questions: Timeline for the pet food plant, total capacity in the processing segment, current trends in raw material prices, market size and revenue targets for pet food, export percentage in the feed business and plans for increase, status and impact of Ecuador shrimp production, fish seed plant plans, and impact of CVD on margins.
- Challenging Questions and Management Responses: Questions About margins in the Processing Segment. Answer: Management detailed measures taken to mitigate effects.
- Indirect Answers: No definitive CapEx numbers were provided for the fish feed plant, pending the results of ongoing trials.
- New Information: Pet food market size in India is around INR 50,000 million, growing at a 20% CAGR, with a volume of 225,000 to 310,000 metric tons.
Management Tone & Sentiment #
- Overall Tone: The overall tone is cautiously optimistic. Management is confident about the first shrimp crop and the potential of new ventures like pet food, but acknowledges challenges like raw material price volatility and CVD.
- Confidence/Concern: Management seems confident in the long-term prospects of the company and its ability to navigate challenges. Concern is expressed regarding wheat flour prices and the impact of CVD, but strategies are in place to address these.