 "Jyothy Labs to post 20-25% revenue growth in FY15: K Ullas Kamath")
Jyothy Labs (Jyothy) posted good strong growth of 21 per cent in revenues at Rs 330 crore for the March 2014 quarter. While one-off surge in advertising spends impacted EBITDA margins which contracted 207 basis points to 10 per cent, lower interest costs and higher other operating income boosted net profit, which surged 147 per cent to Rs 29 crore. Going forward though K Ullas Kamath, Joint Managing Director of the personal and home care Jyothy Laboratories, expects lower ad spends and premiumisation to drive margins. In conversation with Sheetal Agarwal, he talks about the road ahead. Edited Excerpts:
Jyothy’s advertising costs nearly doubled to Rs 40 crore in the quarter. What are the reasons for the same? Do you expect this number to normalise going forward?
The ad spends are likely to normalise around 11-12 per cent of sales going forward. In the quarter gone by, we spent more on Margo and Maxo which led to the sharp spike in ad spends. However, full year ad spends were reasonable at 11 per cent of sales.
Interest expenses have come off significantly in this quarter (down 521 basis points to 1.2 per cent of sales). What are the reasons behind this?
Can you explain the four-fold jump in other operating income in the quarter?
This is largely income transferred from other subsidiaries. Going forward as well, we believe these numbers will continue and expect this income to be sustainable.
What is your guidance on revenue growth in FY15?
We expect our revenue growth to be between 20-25 per cent in FY15 driven by strong volume growth of 15 per cent. Each of our segments have key growth drivers in place. We are launching Re 1 sachet in Ujala to capture unbranded liquid blues market. This alongwith re-launch of Henko will boost Fabric care segment. Margo facewash will fuel growth in personal care segment, while new marketing campaigns will support Exo products. Our mosquito repellent Maxo works on an innovative mechanism for dispensing its liquid. Overall, FY15 should be a good year for us.
Jyothy’s EBITDA margin was 10 per cent- much below the guidance of 14-15 per cent, driven by higher ad spends in March 2014 quarter. Do you expect margins to improve and what will be the key levers going forward?
We expect EBITDA margins to be around 14 per cent levels in FY15. This quarter numbers were impacted by higher ad spending. In the long run, our strategy is to move towards high-margin product mix with high brand visibility across all our segments.
In the home care segment, how have Maxo coils and Maxo liquid performed?
Coil posted moderate growth of 18 per cent while liquid grew 95 per cent given its low base. Going forward, we expect this segment to grow at 20-25 per cent levels driven by market share gains primarily in the liquid segment.
Fa and Neem brands seem to be under pressure? What is your plan there?
These brands have grown 25 per cent in FY14. We are not spending money on them as of now. Our other big six brands are our key focus areas as of now.
Jyothy’s advertising costs nearly doubled to Rs 40 crore in the quarter. What are the reasons for the same? Do you expect this number to normalise going forward?
The ad spends are likely to normalise around 11-12 per cent of sales going forward. In the quarter gone by, we spent more on Margo and Maxo which led to the sharp spike in ad spends. However, full year ad spends were reasonable at 11 per cent of sales.
Interest expenses have come off significantly in this quarter (down 521 basis points to 1.2 per cent of sales). What are the reasons behind this?
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Our net debt is down to Rs 400 crore in FY14 versus Rs 607 crore in FY13. This debt is primarily zero-coupon non-convertible debentures payable in November 2016. We will not incur any interest pay-out on them for next three years. When we redeem in November 2016 it will be paid in one shot at premium of Rs 147 crore which has been adjusted in the securities premium account. Thus, we will be a debt-free company by FY17.
Can you explain the four-fold jump in other operating income in the quarter?
This is largely income transferred from other subsidiaries. Going forward as well, we believe these numbers will continue and expect this income to be sustainable.
What is your guidance on revenue growth in FY15?
We expect our revenue growth to be between 20-25 per cent in FY15 driven by strong volume growth of 15 per cent. Each of our segments have key growth drivers in place. We are launching Re 1 sachet in Ujala to capture unbranded liquid blues market. This alongwith re-launch of Henko will boost Fabric care segment. Margo facewash will fuel growth in personal care segment, while new marketing campaigns will support Exo products. Our mosquito repellent Maxo works on an innovative mechanism for dispensing its liquid. Overall, FY15 should be a good year for us.
Jyothy’s EBITDA margin was 10 per cent- much below the guidance of 14-15 per cent, driven by higher ad spends in March 2014 quarter. Do you expect margins to improve and what will be the key levers going forward?
We expect EBITDA margins to be around 14 per cent levels in FY15. This quarter numbers were impacted by higher ad spending. In the long run, our strategy is to move towards high-margin product mix with high brand visibility across all our segments.
In the home care segment, how have Maxo coils and Maxo liquid performed?
Coil posted moderate growth of 18 per cent while liquid grew 95 per cent given its low base. Going forward, we expect this segment to grow at 20-25 per cent levels driven by market share gains primarily in the liquid segment.
Fa and Neem brands seem to be under pressure? What is your plan there?
These brands have grown 25 per cent in FY14. We are not spending money on them as of now. Our other big six brands are our key focus areas as of now.