Voltas Limited Conference Call Highlights

The container freight rates have seen a sharp escalation amid the global trade disruptions widening the supply-demand gap owing to pandemics.

 39% growth revenue from operations at Rs 1767 crs as compared to the previous quarter. The Profit before tax grew over 56% from Rs 108 CRS to Rs 168 CRS in the current quarter.

Segment A – Unitary Cooling Products: Limited operational hours/days imposed as part of regional lockdowns by various States and Local Authorities throughout the quarter took its toll on the consumer durables industry as a whole, especially for cooling products market, during the period that has traditionally been the peak season for sales.

Quick and nimble to respond, aided by strong 22,000 touchpoints across the country. Meanwhile, patchy summers in the South and East regions continued to be a challenge, but robust sales in the North and Central regions helped balance the performance.

Focus on the Inverter sub-category with competitive pricing and a larger number of SKUs yielded a favorable outcome – Inverter sales growth was 18%, well ahead of the previous year.

 Overall, in the AC segment, Voltas continues to retain undisputed leadership with an exit June market share of 26.7% at multi-brand outlets.

Continued leverage with trade & distribution, the contribution from exports, healthier model mix from B2B accounts helped a stellar growth in the Commercial Refrigeration vertical in Q1. Launch of new SKUs, increased number of touchpoints, and acceptance of products resulted in higher growth in the current quarter despite the availability of a limited time window of sales for the Air Cooler category.

Effective 1st April 2021, the Group has re-organized the reporting of Commercial Air Conditioning and customer care business from Segment - B (Electro-Mechanical Projects and Services) to Segment - A (Unitary Cooling Products for Comfort and Commercial use) to align with business objectives.

Commercial Air Conditioning business includes sales of VRF systems, Chillers, Ducted units, Vapor Absorption Machines, etc., and Customer care and retrofit business. Performance from this vertical also improved during the quarter. With this restatement, all product sales will henceforth be reported under Segment – A (Unitary Cooling Products for Comfort and Commercial use).

Better product mix, coupled with planned procurement of inventories helped to partially mitigate the increased cost of commodity prices and higher logistics costs.

Continued with various cost austerity measures, however, certain customer-centric sales promotional expenses were incurred during the quarter, leading to higher selling & distribution expenses. As a result, Turnover grew by about 19% in the current quarter and the Segment EBIT was Rs. 118 crores as compared to Rs. 114 crores in the previous year.

Segment B – Electro-Mechanical Projects and Services Construction activities were allowed in the current quarter, unlike the national lockdown in the previous year. This provided relatively easier access to the project sites resulting in higher progress in the execution of projects in both domestic and international markets, leading to a 67% growth in Segment Revenue for the quarter to Rs. 688 crores as compared to the previous corresponding quarter of Rs. 412 crores. Progress of the projects and a centrally driven focus on the collection helped to restrict ECL provisions, resulting in improvement in Segment profit of Rs 31 crs as compared to a loss of Rs 44 crs in the previous year.

Weakened sentiments of delay in announcement of Capex plans by potential clients across the operational geographies coupled with the diligent choice of orders has translated into subdued but high-quality order booking during the quarter. Nevertheless, totally carry forward order book at Rs. 6149 crores as of 30 June 2021 provides an adequate level of forwarding revenue visibility. The carry-forward order book for Domestic projects at Rs. 3702 crores contained a mix of orders across Water, HVAC, Rural Electrification, Solar, and Urban infra-activities. The International order book of Rs. 2447 crores represented MEP work, mainly in UAE and Qatar.

Segment C – Engineering Products and Services Segment Revenue and Results for the quarter were at Rs. 115 crores and Rs. 38 crores, depicting the growth of 142% and 93% respectively. Both Mozambique and India operations have contributed to this performance backed by the renewal of the contracts as well as a strong order book of Crushing & Screening Equipment. After Sales support and renewed demand for Capital machinery both in spinning and post-spinning has contributed significantly to the bottom line for this vertical.  

• The announcement of the much-awaited PLI scheme will boost the sentiments for the capital machinery industry, however, supply-chain disruption may pose some interim challenges.
• Voltas Beko Production at Sanand factory surpassed the milestone of 5 lac units since its opening and cumulative sales since inception crossed 1 million units. Voltbek products continue to be accepted well in the market, and we are happy to witness significant demand pull from the Trade.
• Voltbek’s market share in the highly competitive segment of Refrigerators and Washing Machines have improved to 3.1% and 2.7% YTD respectively. In terms of distribution, billing points have been scaled up to exceed 1200 numbers. Accelerated opening of exclusive brand shops & Experience zones along with cost-effective digital marketing should help in increasing reach and augmenting brand visibility. Distribution and other synergies with Voltas continue to be aggressively leveraged to achieve the overall objective of break-even and targeted market share.

Outlook: Although Q2 is a lean period for Cooling products, the start of the festival period may witness a spurt in demand. It will be interesting to see the impact of a myriad of factors such as the anticipated third Covid wave, the pace of vaccination and opening up of economy at large. Continue to focus on working capital management and conservation of cash while remaining cautiously optimistic.