Expect top line to see 10-12% growth in next two quarters: Ullas Kamath, Jyothy Laboratories Ltd

A slump in global crude prices has helped Jyothy Labs see 4-6 per cent improvement in the Q2 numbers, feels Ullas Kamath, Jt. MD, Jyothy Laboratories. In an interview with ET Now, the MD said that the company is raising its advertisment expenditure to boost volumes.
ET Now: It has been a very-very good performance for you how did you manage to post this kind of numbers and what is the outlook like, because I did see my analyst tell me that there is a possibility of this in performance improving in quarter three?

Ullas Kamath: We did extremely well in last two quarters and the last quarter has been good on all the four parameters in FMCG business. There is a top line we grew about 9 per cent in volume terms and gross margin improvement of 3 per cent from 48 to 51 per cent and EBITDA margin improvement from 10.7 to 13.7 and net profit up by 54 per cent.

It is in all parameters and basic reason has been like, crude oil at all time low, and that has given us all the consumer goods company between 4 per cent to 6 per cent improvement. We are invested back in advertising which has gone up from 11 per cent to 13 per cent and result of that is what the volume growth what we have got.

ET Now: When your peers are posting the sluggish sales you have managed a good show so my question is whether this top line numbers that you are posting will that continue for the quarters ahead, you have kind of exhibited optimism but what about the immediate next two quarters?

Ullas Kamath: In fact if you see the last six quarters we have been consistent on a top line growth in a volume terms. This we do not get opportunity to increase the prices because of the lower commodity price.

Having said that, coming like going two quarters we are very confident that our top line growth should be in the range of 10 per cent to 12 per cent, which is what our guidelines has been and will be there. Another reason is that the sectors in which we are, the segments in which we are it is not directly like comparable to the peers because we are in fabric care, we are in dish wash segment, we are in mosquito repellent and also in bit of personal care.

So segments are different and our market penetration is much much better on compared to some of the peers so overall it is all around exhibition of like execution.

ET Now: For the longest time I have asked you that what are you planning to do with your non-core assets, you have said that look the desire is to get rid of some of these non-core assets and that comment was made on a public forum about four years ago nothing has happened on that front after that?

Ullas Kamath: Three-four properties are there, but real estate market is so bad, and we just do not want to give the property where we do not get the reasonable price, at least the market price. So most of our assets are in the south and the east, and market has been really, really bad for last three-four years. I am sure you are aware of that, and it is not easy to sell the real estate asset especially during the downturn. So we do not want to get struck. That is the reason why it is still on the block.

ET Now: What has been the benefit of commodity deflation in your margins, because frankly, if volumes are not growing in double digit and if your margins have expanded by about 300 bps I would imagine that is largely because of commodity deflation?

Ullas Kamath: For us, we got about 5 per cent to 6 per cent benefit because of the crude price down, and which we have invested back in advertising and sales promotion that is what got us 9 per cent volume growth and which is a shade below our expectation. Looking into the demand situation at this point in time, the country in FMCG business and 9 per cent is not that bad as far as the volume growth is concerned. Happy if it is 10-11 per cent, which we are hoping in this festive season. As of now October looks great, has done great, and November looks great as well because of the festive season. I hope with this, demand should get back to normal growth of 10 per cent to 12 per cent in the coming quarters.