A reflection of inherent strength
It gives me immense pleasure to present our Annual Report for FY 2019-20. We delivered a three-fold increase in net profit over the previous financial year, despite an extremely challenging external environment. Eveready's strong performance bears testimony to our renewed focus on the core business (batteries and flashlights) and various cost-saving initiatives that were margin-accretive.
With high brand salience, Eveready remains an undisputed leader in batteries, with a 50% market share. For flashlights, we retained our 75% market share in the organised sector. Our robust distribution network, diversified product range and quality offerings will not only enable us to further consolidate our leadership position but will also help scale our new businesses - luminaries and small home appliances.
A challenging operating landscape
The external environment globally remains subdued, with the COVID -19 pandemic outbreak disrupting economic activities and supply chains. The Indian economy, however, had been facing its own set of challenges much before the onset of the pandemic, with weak domestic consumption, credit tightness, sluggish manufacturing and depressed business sentiments.
The Government of India implemented several measures to revive the economy, including reduction in corporate tax rates, rationalisation of Goods and Services Tax (GST) and acceleration in infrastructure investments. The Reserve Bank of India (RBI) also undertook innovative steps to keep interest rates lower for longer and drive credit flows. However, the pandemic dashed all hopes of a recovery. India recorded its slowest GDP growth in over a decade at 4.2%.
The Government, along with the RBI, was once again quick to announce an interim relief package for economically vulnerable sections of the nation and followed up with a series of measures culminating into a Rs. 20 Lakh Crores (~10% of the GDP) stimulus, with a call for boosting domestically manufactured goods and services.
Our gross revenues for FY 2019-20 came in at Rs. 1,210.93 Crores, which was lower compared with FY 2018-19, largely due to the de-growth in the lighting and appliances segments by Rs. 158.99 Crores.
All the categories including batteries and flashlights were adversely impacted as optimal sales could not be achieved in March 2020 as a result of the countrywide lockdown imposed to contain the COVID-19 crisis. Additionally, the lighting and appliance segments were significantly impacted by supply constraints and price cuts which had to be undertaken to augment demand.
Having said that, we reported an operating EBDITA of Rs. 121.13 Crores which was almost at par with that of the previous year. PAT was much superior at Rs. 179.57 Crores in comparison to the previous year - augmented by sale of non-core land assets in addition to a robust operating performance. Without the year-end disruption, the performance would have been still better.
The battery segment, on a turnover of Rs. 728.99 Crores, recorded its highest EBIDTA margin at 21.1%. This was attributable largely to favourable commodity prices, coupled with upward pricing revisions and reduction in dumped imports from China, post implementation of quality standards issued by the Bureau of Indian Standards (BIS).
Although flashlight volumes came in lower despite being on a recovery path from the third quarter of the year due to sudden stoppage of economic activities, the segment recorded a robust EBIDTA margin of 15.7% on a turnover of Rs. 165.74 crores. We have implemented various initiatives to penetrate rural markets further with our innovative and competitively priced flashlights.The battery and flashlight segments are expected to show better volume growth in the coming year once economic activities normalise. In addition, the full implementation of the new BIS standards is likely to further drive sales in our battery segment.
Turnover for the lighting segment was at Rs. 238.11 Crores, down around 26%, mainly due to supply constraints as well as unit price decrease in bulbs. It also includes a 5% turnover drop for the disruption caused by lockdown in March 2020. This resulted in a negative segment EBIDTA of Rs. 18.83 Crores due to a reduction in economies of scale. We expect to improve the situation from the coming year as the situation normalises and new suppliers are developed along with the establishment of a more stable pricing regime.
Turnover for the appliance segment was at Rs. 61.47 Crores (versus Rs. 138.82 Crores in FY 2018-19). This dip was primarily attributable to weak demand and supply constraints for key products which necessitated portfolio consolidation, distribution channel rationalisation and price decreases. The segment registered an EBIDTA loss of Rs. 27.07 Crores. However, as the segment scales up in the near future, revenues will start matching the cost structure, resulting in a positive impact on financials.
We monetised our land assets in Chennai and Hyderabad during the year and utilised the sale proceeds for repayment of debt, which reduced overall leverage of the Company. Additional cost-saving measures, release of working capital with the discontinuance of the packet tea business, implementation of BIS standards further helped the Company in improving margins.
People remain a priority
Our people are our growth partners. We have a merit-based work culture that promotes inclusivity and diversity. Our passion for excellence is supported by the rich knowledge base, expertise and experience of our teams. We continuously work towards enhancing the skill levels of our people through several training and learning programmes.
Committed to adding value
At Eveready, we are geared up to consolidate our business segments and penetrate our reach across different customer groups. Going forward, we will further strengthen our brands with products that resonate with Indian households, adding value for our various stakeholder groups.
We look forward to your continued support in taking Eveready to greater heights. I conclude by thanking our people, customers, distributors, investors and all stakeholders for being part of this exciting journey.Regards,