Huhtamaki reports weak performance amid input cost pressureHUHTAMAKI - 177 Change: -1.70 (-0.95 %)
News:Huhtamaki India’s Q4CY21 revenue increased 19% YoY Rs.662 crore mainly on a favourable base of last year (revenues were down by 17% YoY). Sequentially revenues were down by 1%. The gross margin declined sharply by 680 bps YoY (~200 QoQ basis) mainly due to delay in passing of higher raw material prices. While employee and other costs as a per cent of sales came in lower on a YoY basis, the EBITDA margin declined by 480 bps YoY (300 bps QoQ) to 1.6%, reflecting the impact of lower gross margin. The company reported net loss of Rs.13 crore vs. profit of Rs.5 crore during Q4CY20.
Views: We believe the company witnessed a weak performance in CY21 (EBITDA margin declined ~500 bps YoY to 4.1%, net loss of Rs.~23 crore Vs profit of ~Rs.96 crore in CY20) led by lower demand and increase in competitive intensity. The lower profitability has resulted pressure in balance sheet thereby weak return ratios. We believe the margins are likely to remain under pressure considering higher raw material prices and low operating leverage. Hence, we recommend that investors exit this counter.