Huhtamaki India Limited (HUHTAMAKI) Q1 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Hothama Ke India Limited CY26 Earnings Conference Call hosted by ICSA Securities Limited. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation. If you need assistance during the conference call, please signal an operator by pressing start and zero on your touchtone phone. I now hand the conference over to Mr. Mohit Mishra from ICSA Securities Limited. Thank you, and over to you, Mohit.

Thank you so much. Good afternoon, everyone. Thank you for joining on Hootam Aki India Limited Q1CY26 Results Conference Call. We have Hootam Aki India Management on this call, represented by Mr. Kamal Taneja, Managing Director, and Mr. Amit Gupta, CFO. I would now like to invite Kamal, sir, to initiate with opening the box, post which we will have a Q&A session. Thank you, and over to you, sir.

Thank you, Mohit, and thank you, Rutuja. Welcome, everyone. Thank you for joining the call today. I hope you had time to go through the financials yesterday. So I'll, along with Amit, give you some flavor of, you know, how management is doing different things. Before, actually, I get into the call itself, a couple of disclaimer statements which I think we should talk about. Number one, you know, we may be talking about a few things or share some information with you which could be deemed as forward-looking. But the intention is to share with you as openly as possible our strategy and initiatives, and they should not be taken as any advice on any investment you need to do in any securities or solicit any investment from you. So, once again, thank you for joining us. Before, actually, I go into the main presentation, let me invite Amit Gupta because he's my new colleague who's recently joined as CFO. Maybe he can introduce himself to you.

Hello, everyone, and good afternoon, you know, to everyone. As the CFO of the company last month, so almost like completing a month in this particular role, I had joined the company, you know, relocating back from Singapore to India. My last assignment was with Dr. Gamble Health Limited in their healthcare vertical as the original finance leader for Asia, Middle East, and Africa. I have started my career primarily in FMCG and healthcare, worked with ITC, Sanofi, and the Procter & Gamble Health Limited first in India as the CF1 Executive Director on the board of Procter & Gamble Health Limited before moving to Singapore. I look forward to the engagement and hopefully we'll have, you know, some...

Thank you, Amit. Very happy to have you in the team. So I'm going to start with the content of the presentation. I hope you had time to go through that, but I'll give you a very high-level information on what Amit will actually go more details into the financials. So at the very top line, we actually improved slightly on our sales. What is the quarter last year? When I say slightly, it's about 10 bibs. However... We've been saying that for... This is a business that we want to operate in. We are going after a higher value business which is also consistent with our strategy and our strength in terms of the innovation leader. We really think that we are on a solid ground now, and it gives us a lot of momentum for... Thanks for the results. which was supported by SalesMix, like I mentioned earlier, and operational efficiency. We've been actually doing a lot of work in the last couple of years, you know, in optimization, improving efficiency in the assets we have, expertise within India and overseas as well. And in this... I have interest income. There's also a huge charge in Q1, which relates to the depreciation, which is really... If I can summarize, net sales up by 10 BIPs, EBITDA improved by 25%, 24.8%, quarter on, like year on year, first quarter last year versus this year quarter one. EBIT went up by 4%, but that's also because of the depreciation to you about earlier. PVT similarly increased by 2.9%, and we were slightly lower on EPS. Now, we are doing, like I said, we've been consistent in our approach. We are also consistent in our approach on global strategy, which we are very focused on, which is mainly on profitable growth. And much stronger accountability. So with those opening notes, I'm going to hand over to Amit, who is going to take you through the financials. Yeah, thanks, Kamal.

So actually the financials for the quarter actually, you know, relay the strategy that Kamal just laid out. And, you know, on the top of the call, you know, on the top of the call, you know, We are looking at the top-line construct. We are actually improving by 10 basis points versus last year for the same quarter, and that's, again, driven by our focus with respect to growth in the selected set of customers and the portfolio choices that we are making with respect to the categories and the customer pool that we are going to service in future. So it's consistent with our overall strategy that is reflecting in the top line. And as Kamal mentioned, you know, from a standpoint of EBITDA margins, we are growing by 25 percentage points. This is, by the way, not a standalone improvement in one particular quarter, but we are seeing a sequential growth in our profitability. And those of you who would have followed our AGM, you would have seen that our profitability numbers have been consistently going up, Which actually demonstrates the effective way our strategy is being played, and that's going through our financials. From an EBIT perspective, we have a one-off. There's about an 88 million INR charge in this particular quarter, which is pertaining to the prior two years. We had, although this is not material, taking into consideration the maturity thresholds. The last two years, you know, 2024 and 2025, but we chose to reflect it in the current quarter itself because we don't see this particular charge to be breaching our maturity threshold for the current financial year also. So fundamentally, we had this particular charge, which is reflective of the lower depreciation charge in the prior two years, primarily because of the fact that, you know, there has been an error. to the depreciation calculation on WDV instead of the SLM method which is being done. This particular charge, we have corrected the books of accounts, both from a P&L and the balance sheet standpoint, and all the reflections in the P&L are coming correct, starting from January 2026. So, our EBIT margins, because of this, has actually improved by only 4%. If I exclude the exceptional item of depreciation, it has actually gone up by 27.8, which is consistent with the growth that we have seen in the EBITDA. However, this particular charge is actually bringing the EBIT margins down to 4%. And our overall profit and loss for the period is actually about 256 crores, which is almost 2% down versus the same quarter last year. But again, this has the implication with respect to the depreciation charge that I just mentioned. If I have to exclude that particular charge, Prior year postings is actually going up by almost 23.1. So, all in all, if I have to summarize from a financial result standpoint, our strategy in play is reflecting in the numbers with the substantial growth in profitability, excluding the one-time corrections of the prior years that we have taken, and the top line which is holding good in spite of the competition that we see. Moving on to the... We actually demonstrated EBIT improvement, EBIT of about 386. 88 million hits. and welcome to the call. We are at 8% EBIT for the quarter, which is in line with the EBIT that we have demonstrated in the quarter for last year. This point is higher. We'll stop at this, and maybe you guys had the chance to look through our annual reports and the financial release, and if you have any questions, happy to address in the later part. Back to you, Kamal.

Thank you, Amit. I think just to add on what Amit said, so you see, in terms of our ways of working, we are always declaring results based on… ethical solutions and make sure the integrity is intact and the transparency to the market as well. So, I think the other thing I want to note is, what Amit alluded to, is in terms of the return on sales or EBIT percent. I think that we are in a pretty... Actually, there's one more thing which I'm very excited about, which is on sustainability. So I want to share a few... I mentioned in the last quarter as well. So when we look at our climate ambition and sustainability, we look at it from a... The first pillar for us is people, right? We invariably talk about safety and wellbeing, right? So actually I'm happy to report that we had We are total recordable incidents. And not just inter- The clear patterns and the initiatives. The second pillar is on what we call the climate pillar. So this is about, you know, what we do for the environment. So I'm also happy to report that we actually engaged in a formal agreement for developing a solar... So, that's been signed, it's been executed now, and we expect to... The third pillar we call as nature pillar which is focused on water. Again, Kapoli, Rudrapur, Srivasa. in other plants as well. Our focus there is improving the solvent consumption, and I'm happy to hear from you. I will work on that. Thank you. The other thing we are also doing on the Product Builder is that actually we are adopting We're recycled. And also being ahead of the call. In terms of reporting, I think you've seen our calendar, our next reporting is going to be end of July. Thank you very much, everyone, and welcome to the show. Maybe ask people for questions.

Shall we begin with the question and answer session?

Yes, please.

Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use answers while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Aryan Vidaria from Equitas Investments. Please go ahead.

Hi, good afternoon. Thanks for the opportunity. Actually, I just wanted to understand, you know, I have two questions. Number one, I just wanted to understand a bit more on the raw material situation post-war. Do you know, what has been the effects on the costs of the raw material? Are we getting any availability? So, you know, what is the situation on the ground?

Yep, and you had a second question also?

Sure, I can ask that too. Again, I just wanted to get a better understanding on the demand and, you know, actually post-war, where is the demand from and how is, you know, the cost increase or the cost situation affecting the demand?

Yep, sure. So this is Kamal. Thank you for the question, Aryan. I'm going to start, and Amit, feel free to jump in. Your first question was on the raw material situation. So firstly, the situation is changing every day, as you can imagine, due to the political situation there. What Thank you. In the end of March, we see prices going up significantly, and then we see kind of a bit of, let's say, tapering, and we are even seeing sometimes the prices are changing again negatively and positively. I think overall, we have probably low to medium double-digit raw material impact on our products overall. The good news there is, firstly, there's no issue with availability. So, you know, being a large multinational company, we have resources. We have the procurement power, I guess, to source these materials from different parts of the world. So, availability is not an issue. Sometimes there's a delay in shipments because especially… Actually, our team did an excellent job. Procurement, supply chain, sales team. We did an excellent job where we passed on more. I think your second question was on demand. So firstly, you know, as you can imagine, a lot of our customers were in kind of a panic situation, so they came to us and asked for more volume, and then they realized that the volume was not there. So it's kind of stabilizing at the moment. So we don't see any significant change because of this situation, but we do see a demand growing As usual, like you see in every quarter in the industry, like I think you must be following up with other FMCG customers we have when they declare the results. Usually, you know, 6%, 5% to 7% is the increase every year. Some customers increase more, some customers do less. For example, the large customers that we play in, usually they are less, maybe 2% to 3% to 5%. And then you see regional customers, smaller customers, who are growing much faster because they are coming from a much smaller base. Anything to add, Samit, on that? No, Kamal, I think you covered it well. Thank you. Hope that answers your question, Arya.

Sure, if I can just squeeze in one more question, please. So, just, you know, on specifically your materials in terms of, you know, packaging films and paper, etc. So, the cost increase, how much percentage cost increase are you paying in these products, paper and packaging films?

Yeah, I wish I could tell you, Arian, but, you know, it's kind of confidential because, you know, it's competitive in nature, so I would not like to disclose that, but I think we do a pretty good job being a global company on getting the best material and availability in the market.

Understood. Sure. Yeah, thank you. And I'll be with you.

Thank you. The next question is from the line of Vishnu from ICIC Prudential Mutual Fund. Please go ahead.

Yeah, hello. So, I was doing an annual report. It's mentioned the Indian flexible packaging industry is going at 10 to 12%. And if your volumes are declining or it is staying stable, do you mean that you're seeding market share for the players or unorganized players?

Look, thank you for asking questions, Vishnu. I think, again, this is consistent with what we have been saying. The market, I don't know, is 10%, 12%. Like I mentioned, there are kind of two different segments that we see in the market. So there are large multinationals, for example, Unilever or Mondelez or Nestle, and then there are smaller... Not so small Indian players, but also smaller Indian players who are operating more into regional markets, smaller markets. So they may, you know, increase or grow faster than the others, right? Because like I said, they're coming from a smaller base. And probably if you accumulate all this volume, it looks much bigger than the other. Multinational customer seat. Now, what we've been saying all these, you know, at least for the last couple of years, that our focus has been very selective. You know, we are, our, let's say, sweet spot or our strength is innovation, you know, premiumization, sustainability. Where, unfortunately, we only have select customers who are interested in those value propositions. With them, I think we are growing pretty okay. Selectively, if we do not participate in other segments which are not aligned with our value proposition, so sometimes it may seem that we are not growing with them. So, I think, like I said earlier, I'm pretty happy with where we are today. I feel we are much more stronger now. ...than we were before, which gives us actually... We're doing a lot of good work with our customers, especially on the sustainability front, and we hope to grow in future in line with market expectations.

Yeah, maybe just to add on to this, you know, when you're looking at the market, of the packaging market where you actually included paper also, you refer to paper also. It's not comparable to the segment that we play in. So, you know, there is no lateral equation that you can draw from the overall market growth to what is being reflected on our side. And hence, I think Kamal covered well the strategy that we are playing on, and the results of that strategy are clear.

Okay, and the other income has also doubled versus last year. Can you provide any split for that? What is driving that growth?

The other income in this particular quarter actually... We have received in this particular quarter, plus there is an increase in the FD interest. So these are the two big components, which is leading to a higher, plus we have FX gain, you know, which is actually, you know, from the exports that we are, with the rupee actually getting weaker, we are having these gains, which are flowing in and reflected in our other So these are the broad three components, which is driving our other income. Thank you.

And, Amit, however, we also have several one-offs which actually netted off that. So it's not that we are improving our margin just because of that.

Okay. Understood. Thank you.

Thank you. The next question is from the line of Rajkumar Vaithanathan from RK Invest. Please go ahead.

Yeah, good afternoon. Thanks for the opportunity. Kamal, the question is, you know, I think you guys have fixed the margins, which is good to know, but just want to know when do we see this dynamic growth being corrected? How long do you think that will...

Yeah. Thank you, Rajkumar. And I believe you know that I'm only on the job for the last three months or so. Not even three months yet. Oh, it is three months, actually. Sorry. Yeah, it feels like a long time ago. But I think it's a very valid question. We get asked that a few times in the past as well. Like I said, I can't disclose the exact numbers, and hopefully you will see that in future. But I can tell you our... We are laser-focused on profitable growth, which is also our corporate strategy, and that is the reason we are here, and we are forming a very strong team, we are getting closer to We are innovating, et cetera, et cetera, and hopefully will be a result in the future.

Okay. But with this inflation on this raw material happening, so do you think that will at least help us in terms of the top line? Because you said the margin should be protected.

Because they'll be passed through to the customers. Like I said, you know, there'll be no impact or virtually no impact on our margin because of that. So top line definitely you would see. You know, barring any market changes, etc. At least that one we would see. But we are trying to grow on top of that as well.

And any upside on the rupee deposition going forward?

Fundamentally, you know, the way we are constructed, we have a, you know, good representation of the exports in our overall business. So the rupee fluctuations actually works both ways. And when you look at month to month, And quarter to quarter, while from a last year standpoint, the rupee is devaluating, but from a quarter on quarter basis, there are a lot of swings happening. So, we continue to expect both helps and hurts from the FX movements, because we have a good chunk of our imports from raw materials, although our net position is still positive on the FX, but, you know, we cannot comment with respect to the future implication of the FX, but yes, it will be in line with, you know, how the market and the rupee behaves versus the global currencies.

Okay, and just couple of questions, housekeeping questions for the CFO. First one is can you quantify what is the amount of interest on the income tax refund that you mentioned?

So, it's about 6.5 crores that we have received. Okay.

And the next question is, there is another expense, there is a jump quarter on quarter from 95 crores to 106 crores. So, what is causing this moment?

So fundamentally, I think so the jump is substantial, you know, from the baseline of 95 to this is not a major jump. Looking at it from a short term perspective of a quarter may not be relevant. And we have, you know, a substantial increase in our operating costs. We are actually, you know, on a percentage to sales, we are actually, you know, coming, our expenses are coming down. So I would not like to comment. Contributing to it, but what I can tell you is that our expense ratios are in line with what has been in the past and, in fact, decreasing going forward. Our profitability numbers are actually showing the way that we have been able to drive profitability with us a flat amount of sales, which is, again, a reflection of the efficiencies that we have in the operations.

No, the reason why I asked is, Kamal mentioned that there are some one-off non-recurring expenses also in the quarter, so that is a reason, where is that item sitting?

Yeah, so the one-off non-recurring expenses as we were talking about are basically with respect to some of the provisions reversals in the base that we have as well as the interest Income that was there, we have depreciation of about 88 million INR for the prior two periods that we have actually charged to the P&L. So some of these, the biggest item on all of these is the 88 million INR depreciation that has been charged. There is also a property charge here, so.

Okay.

Thank you so much.

Thank you. The next question is from the line of Rupul Shah from Rupul Reve Equity. Please go ahead.

Yeah, thanks for the opportunity. So, Kamal, I had, you know, a couple of questions for you. You alluded earlier in the call that, you know, post-war, end of March, and now you've seen tend to sort of hide, I would say, I just wanted to understand, you know, how fast is, you know, the transmission of these RM costs to our customers, because I believe there will be a pass-through arrangement, and a lot of companies, a lot of... I believe that you said that, you know, there is ample availability, so I assume there will not be any force measure at least on, you know, the raw material basket, which we have. But is the transmission of, you know, these costs pretty? I hope that at least for the next quarter or short term, we will be facing to absorb these margins. Second question, you know, I had was that the annual report mentioned that, you know, the 100 crores which we were supposed to pay back our parents in February 26 has been amended to June 27. I just wanted to understand the reason for this, you know, because it inflates the balance, I understand there is no liquidity risk, but it just inflates the balance sheet and, you know, from a ROC perspective, also there is. It brings down that...

Yes, so I think we'll let Amit answer you on the 100 crores first, then I'll come back to the raw material.

Yeah, so hi. The standpoint of the... And welcome to the call.

I have a question on the RM cost. It cannot be instant, right? So once you get the RM increase, we increase our price as well because we looked at our inventory, current inventory, old inventory. And we take a pragmatic, like an average, almost like an average cost review on what we have, and we went with the price increase accordingly to our customers. Yeah? Because there will always be a mix, right, of inventory, which we bought at a lower price, and the one which we got at a higher price. We're very focused on our bottom line, and as you know, we've been growing that. We took a very, very swift action on that. In fact, by the end of March, we had almost We are very transparent with them, and whenever there's an adjustment, we are also very up or down, depending on how they are moving. So actually, I would say, in my experience, what I've seen over the years, I think this is one of the best practices.

So, I mean, it's really fantastic to hear that, at least from what I understand, you know, that at least we've been You know, our per kg realization, you know, if I may. So that's heartening. Amit, the other thing, you know, request I had is that, and I also mentioned it, I believe, in the earlier calls also, when the company makes, you know, the presentation, you guys also plug in the other financial income as part of your operational, you know, EBITDA. You know, quite discerning and, you know, at least, you know, as analysts like us also, we review them, we review the other non-operational or financial income separate. So I would request if, you know, you guys can consider this aspect when you make the new presentation, you know, in the future. Thank you so much.

I'm actually looking at the unaudited or the audited results that we have released yesterday. Other income is actually separately called out, so, you know, is there a specific kind of a disclosure that you have mentioned?

No, no, in your presentation today, when you make operational EBIT and operational EBITDA, so that actual number is not, you know, most analysts would remove the other income part which is non-operational or financial in nature. Which is reflected in your audited results. So that is where I was coming to.

Point noted.

Thank you. The next question is from the line of Aryan Vidaria from Equitas Investments. Please go ahead.

Yeah, it's time for the opportunity again. So, actually, just, you know, thinking from it in this perspective, would you say that the war caused due to the war ladder has been kind of, you know, blessing and disgrace for you? Because, you know, you guys would have seen higher prices and it would, so margin, you are saying it would not have first, but obviously it would see higher income, right? So in terms of, you know, versus the regular packaging clearance which we have, you know, what would be your high-level opinion there?

I think what you are saying is, comparatively, being a bigger organization, do we have a advantage, right? That's what your question is, right?

Kind of, yeah. That's true. Plus, you know, the overall inflation being good for you because it leads to higher revenue. That is true.

Yeah, I think, yes. So maybe there are probably two questions there. So first of all, let me address the higher revenue because of inflation, right? That is true. You know, when we are passing on higher costs to our customers, obviously our revenue would increase. But again, you know, we are a company, we are very transparent with our customers, we value their partnership, they value our partnership, and most of the time, actually all the time, we are very transparent with them when we incur increased costs. It's actually, it's also in our contract, to tell you the truth. They understand that we are passing on the exact cost or very similar to that. So actually, the revenue goes up, but actually it doesn't make much difference to the margin, right? Because it's just passed through. So I think revenue, yes, but I guess as investors on the call here, you're looking much more on margin itself. So I think that has minimal impact, if anything. Have the reach, for example, you know, buying power or having the availability, etc. I would think so. That's the case with us because we have the global resources and the reach. Any of these raw materials from . I'm very happy about that, actually, the way we handle the overall situation. Well, more to go, who knows where it's going to end up, but right now, I think we are sitting in a good position.

Yeah, and I would also like to confirm that, you know, And the pass-throughs. This is our strategy of expanding the margin that's reflected.

No, no, obviously, obviously, what I meant it as in, like, let's say your revenue is 100 and you have 20% margin, then your profit is 20. But if the revenue only becomes 200, then at 20% margin, you earn 40 rupees. So that is, I'm not saying because of the war, but in some way, inflation is beneficial for you is what I mean. But I think I got my answer. The operations have been, you know, very well managed.

Thank you.

Thank you. The next question is from the line of N. Moody, an individual investor. Please go ahead.

Yes, sir. Thank you, sir. Sir, I am a bit better. Best I want to tell you is that you are a bit more blunt.

Mr. Modi, I think what you meant is the capacity utilization? Yes, sir. Okay, okay. Yeah, I think, again, competitive in nature, I can't give you exact number, but I think we have a lot of room to grow, if I can say that, yeah? So capacity is not a constraint at the moment.

But that's what I want to do, sir, yes.

Thank you.

Thank you. The next question is from the line of Rajkumar Vaidyanathan from RK Invest. Please go ahead.

Yeah, thanks for the follow-up. So, Kamal, the question is, are you looking at any inorganic opportunities?

So, thank you for the question, Ashko. I think it's like, you know, somebody is asking you to run before walking, you know. I think we are trying to strengthen our organization. We are trying to strengthen our operations. I think we are very happy with what we have done so far. Again, the results will show in future, but I think at the moment, we think there is enough. There's enough demand in the market. There's enough opportunity that we can grab in the market, which is aligned to our value proposition. So I think the short answer is not at the moment. But, you know, if something comes up, we would definitely look at that. But right now, it's not in our radar. A lot of room to grow here.

Yeah, yeah. Okay. Sir, just looking at the shareholding pattern, so I don't see much of institutional participation in our company. So, just wanted to know any plans on that, do you engage with the institutional investors? Because given Tamaki is a multinational company, I mean, it's very rare to see MNC is having no institutional participation. So, just wanted to get your comments.

Yeah, so, in, um, You know, the choices with respect to the investors in a particular company is not kind of determined, you know, by the company, and, you know, it depends upon the individual, you know, choices that the institutions would like to make. It's not that we don't have any institution investors and, you know, the shareholdings of the institutions across the scripts keep moving, but we don't kind of engage with respect to, you know, solicit any kind of participation from a specific set of investors. I think I would rest rested at this, but you know, it is entirely market-driven.

You know, the reason for asking this question is because your stock is only valued, I mean, it's almost trading at one times book, but that is unheard of for a multinational company. So I mean, you know, if you have institutional interest, then, you know, the liquidity in the stock will be more and you will enjoy a better valuation. And the question is coming more from that standpoint.

Yeah, so looking at the way our EPS and the return on capital ratios are improving, we believe that, you know, the valued investors will look at it differently, but we don't solicit any kind of engagement on that piece.

Okay.

Thank you.

Thank you. Participants who wishes to ask a question may be the press star and one. The next question is from the line of Anil Sharma, an individual investor. Please go ahead.

Yes. So my question is regarding, you have put aside two assets for sale. What are those assets and what is the guidance you have already told, but what are those assets and where are they?

Sorry, Anilji, we didn't get your question. Assets, did you say assets or?

You have put assets for sale.

Assets for sale.

Current assets, other current assets.

Land and buildings. Yeah, so we have a property in Daman, which we have actually put up on sale, you know, so we have curtailed our operations there, and it's related to that.

Okay. Thank you, sir. That's great.

Thank you. Terizan, gentlemen, that was the last question for today. I now hand the conference over to management for closing comments.

Thank you, Rutuja. Well, first of all, thank you, all of you, for joining the call today. I appreciate your support. And there were some very good questions asked in this call, and I look forward to, you know, engaging with you along with Amit next time. We hope we answered all your questions satisfactorily. And like I said, once again, and we look forward to talking to you again in future after the second quarter.

Thank you. Ladies and gentlemen, on behalf of ICSS Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Thank you.