Expect growth going forward to be with better EBITDA margin: Dodla Dairy

Dodla Dairy Ltd has reported a 31 percent fall in its consolidated net profit to Rs 29.39 crore for the quarter ended September. Its net profit stood at Rs 42.56 crore in the year-ago period, according to a regulatory filing.

Total income rose to Rs 569.47 crore in the second quarter of this fiscal year from Rs 462.02 crore in the corresponding period of the previous year. Telangana-based Dodla Dairy Ltd is one of India's leading integrated dairy companies incorporated in 1995. The company procures, processes, and sells milk and milk products.

The company's milk procurement is centred in five states and products are available for purchase in 12 states and has 103 milk chilling centres/plants.

Dodla Sunil Reddy, MD of the company, said, “Although dairy industry quarter-on-quarter does go through some vagaries and this particular quarter we had contrasting things because of fuel price increase. Also from the EBITDA to profit after tax (PAT), we had a bit of one time impact that happened because of we repaid our loans and there was a prepayment thing which we had to do and a bit of the tax implications that we did because we had got some dividends from our subsidiary in Africa and we got it to Singapore entity.”

He added, “We have actually done well, we had a growth of 18 percent in terms of revenue, although our quarter-on-quarter number is a little lower, but the half yearly numbers, it has been a much smaller number contrasting declined of only around 17 percent and the PAT at around 13 percent. This like I explained was due to onetime issues that we had, but we will always maintain the higher double-digit EBITDA margins that we have done. We will keep in line with the rest of the industry and we will keep going ahead with a better margins now.”

On value added products sales Reddy said that value added products will go up in the future. There was a slight contrast because of the monsoon that we had. Value added products predominantly led by fermented products, consumers tend not to consume fermented products when there is the rain and it so happened that this time at least in the states where we operate we had a substantially larger monsoon period which was extended and that is a reason we saw the little shrinkage which will come back as the weather has improved now.

He added, “Our value added products are roughly around 28 percent of revenues, curd normally constitutes 23 percent of it and we have a whole basket of other products including ice cream which contributes the remaining. Actually more than ice cream we lead with our flavoured milk followed by other products.”

On demand from HoReCa segment Reddy said for us our HoReCa market is very small, it is only maybe a couple of larger institutions of the IT sector. But the pickup has happened there has been an improvement in the HoReCa sector and the volumes are increasing.”

With regards to capacity utilisation he said, as we have also for powder capacity, which we normally use in the month of October, November, December which we convert into powder that is why our capacity utilisation will seem a little lower now because again once we get the seasonality it moves up. With Africa, with our consolidated we should be back to our 70 percent to 75 percent capacity utilisation.”

On expansion plans Reddy said, “We have already entered the new geography of Maharashtra for procurement point of view. We will also be entering into hopefully more of the Karnataka region, we are looking at expanding more into the postal Karnataka where we are not present and if possible, more into Tamil Nadu to strengthen our operations there.”

On milk procurement he said, “Milk procurement on a litre basis have come up to around Rs 30 rupees on an average of all the locations put together. Milk procurement prices will be little bit on the stable side till December. December to March again, we might see a slight uptick. We are more worried about our fuel prices now. Procurement and fuel both are the ones which are going to come into play for us. As long as we are maintaining our margins we will not look at the price hike, but if we do get pressure on margins, I think we will have to take a small price hike which we will be able to effectuate if it comes to the pressure on margins.”