Greenlam Industries soars in revenue growth – Why their profit margins are struggling

Greenlam Industries Limited, one of the world’s leading laminate manufacturers, has reported a notable 17.4% year-over-year increase in net revenues for the first quarter of FY25. The Company’s net revenues reached INR 604.7 crores, up from INR 515.2 crores in the same period last year.

For the quarter ending June 30, 2024, Greenlam Industries Limited achieved significant revenue growth but faced challenges in profitability. The Company’s consolidated net revenues grew to INR 604.7 crores, a 17.4% increase compared to INR 515.2 crores in Q1 FY24. The laminate business experienced a value growth of 13.2% and a volume growth of 11.9% year-over-year, driven largely by international revenue streams.

Despite the revenue increase, EBITDA remained flat at INR 64.0 crores, marginally down by 0.6% from INR 64.4 crores in the previous year. The Company reported a net profit of INR 19.9 crores, reflecting a significant 39.7% decline compared to INR 33.0 crores in Q1 FY24. This decrease in net profit was attributed to higher interest expenses and depreciation related to new projects.

Comparing Q1 FY25 with the previous quarter (Q4 FY24), Greenlam Industries Limited saw a slight decrease in revenue from INR 624.1 crores to INR 604.7 crores, a decline of 3.1%. EBITDA fell by 23.4%, from INR 83.5 crores to INR 64.0 crores. Profit Before Tax (PBT) also decreased substantially by 49.1%, from INR 53.1 crores to INR 27.0 crores, and Profit After Tax (PAT) dropped by 51.2%, from INR 40.8 crores to INR 19.9 crores. Basic EPS declined from INR 3.20 to INR 1.56.

Greenlam Industries Limited’s laminate business showed robust performance with significant international revenue growth. The Company reported its highest international revenue of INR 285.6 crores for the quarter, up by 22.1% in value and 13.8% in volume terms year-over-year. However, this growth was tempered by logistical challenges, including delays in container availability, increased shipment times, and rising freight costs for both imports and exports. The Company also faced domestic growth challenges due to severe weather conditions and disruptions caused by general elections.

Gross margins for Q1 FY25 stood at 52.0%, slightly lower compared to previous periods. The EBITDA margin declined to 10.6% due to higher operating expenses. Greenlam’s new units, including the laminate unit in Naidupeta and the plywood unit in Tindivanam, are progressing well, with the Naidupeta unit becoming EBITDA positive and the Tindivanam unit showing growth and reduced losses.

Saurabh Mittal, Managing Director and Chief Executive Officer of Greenlam Industries Limited, noted the strong revenue growth despite the challenging environment. He highlighted that the international revenue growth was partially offset by logistical issues and increased operational costs. Mittal mentioned that the Company’s gross margins were slightly lower, but the operational progress in new units and improved working capital management were positive indicators. He expressed optimism about overcoming current challenges and achieving growth targets in the coming quarters.

Greenlam Industries Limited’s financial results for Q1 FY25 reflect a combination of impressive revenue growth and persistent profitability challenges. The Company’s strong revenue performance, especially in international markets, is commendable. However, the decline in net profit and EBITDA margins suggests that operational and logistical challenges are impacting profitability. Greenlam’s strategic focus on expanding its manufacturing capabilities and improving working capital management is likely to support future growth, but the Company will need to address ongoing cost pressures and logistical issues to enhance its financial performance.