Overview
I am pleased to present our performance for FY2018-19 for a number of reasons.
The year under review was one of the most challenging in recent years, marked by a
visibly weaker consumer sentiment and corresponding decline in offtake from the second
half of the financial year.
Despite this unforeseen reality, the management at Greenlam Industries responded with
speed and effectiveness. The Company reported profitable growth; revenues increased 11.9%
while profit after tax strengthened 19.3% during the year under review. This improvement
in the face of diverse challenges – intense competition, tentative global
consumption, currency volatility, trade wars and uncertain political developments –
was a testimony to the Company's overarching culture called bettering.
Culture called Bettering
A number of observers are likely to ask: what is this culture called Bettering at
Greenlam?
This is how I have always explained it: whenever there is a slowdown in the marketplace
or an unexpected increase in resources costs, it would be nave to believe that we would
be able to pass these cost increases to our consumers. At Greenlam, during these junctures
we have generally tended to enhance our internal focus. We believe that by looking within,
we are able to exercise a deeper grip on factors within our control; this deeper insight
inevitably enhances our understanding of prevailing realities; this understanding provides
us valuable cues on how we may improve processes to shrink time, enhance quality and
reduce costs.
At Greenlam, this culture is not invoked in the face of sectoral downturns; it
represents our reflex system across all market cycles. The result is that this constitutes
Greenlam's natural body language and core personality. At our company, what is good must
be made better. This sustained commitment is derived from the ability to challenge the
status quo, consistently believe that there is always a better way to do things, and that
in this journey of continuous improvement, the sky is indeed the limit.
At Greenlam, we refer to this as our Culture called Bettering.
How this culture played out in 2018-19
During the year under review, our Culture called Bettering played out visibly.
At Greenlam, we have always believed that a slowdown represents an attractive
opportunity to deepen our competitive advantage and outperform the sectoral average. This
was visibly demonstrated during the last financial year: even as the broad interior
products sector registered subdued growth, Greenlam's revenues grew 11.9% . During this
challenging year, a number of players were compelled to absorb the increase in costs in
the face of a slowdown in the realty sector and deferment of interior refurbishing by a
number of players. This reality affected the margins of most players.
At Greenlam, we consistently believed that during these market junctures, the distance
between Greenlam and the other brands would widen. This conviction was validated: by a
prudent leverage of our various intangible strengths – brand, portfolio complement
and distribution reach – we were able to pass on the cost increase, which
strengthened our revenues and validated our sectoral leadership. Besides, we strengthened
our laminates product mix by plugging product gaps, introduced new designs, strengthened
the weightage of value-added products and reinforced our positioning as a premium
non-commoditised player. The result is that our laminates revenues grew 10.2% (4.3% growth
within India and 17.2% globally). Average realization per sheet was increased by 10.25% in
comparison to the previous year. Although, we could have generated higher volume sale by
undertaking a price revision, we chose to grow sustainably by protecting our margins and
maintaining a healthy Balance Sheet.
Our decorative veneers and allied business reported a healthy growth of 22.3% for the
year. The decorative veneer segment grew 10.6%, engineering wooden flooring business grew
64.3% and engineered door set business grew 39.6%. Although the floor and door businesses
registered a loss at the EBITDA level, the growth momentum is expected to accelerate.
The result is that we did not just grow our business during the year under review; we
ensured that our margins were not highly impacted. Although overall EBITDA margins
declined from 13% in FY2017-18 to 12.4% in FY2018-19, the margins from our laminate
business, which accounts for nearly 85% of our revenues, stood at 13.65% during the year.
Net profit margins improved by 40 bps to 6% compared to 5.6% in FY2017-18. The RoCE and
RoE stood at an attractive 17.2% and 18%.
The Company's US and APAC subsidiaries performed better than in the previous year; the
UK subsidiary reported profit in FY2018-19.
Strengthening the core
At Greenlam, we have always believed that slowdowns create attractive opportunities.
Such markets make it possible for companies like Greenlam to leverage their
longstanding competencies: economies of scale translating into cost leadership; wide
global footprint making it possible to move from countries experiencing pricing pressure
to markets affording superior realisations; deeper ability to invest in technologies with
the objective to enhance operating efficiencies. The other big advantages of slowdown is
that the resource costs get cheaper (generally), people retention is higher and it becomes
easier to enhance mind share when most players are holding back on brand investments.
Over the last decade, one of the ways the Company differentiated itself was through its
wide global footprint. As part of a hub and spoke approach, the Company selected to
acquire/establish subsidiaries in large countries or contiguous to a number of country
markets. The result was that the Company's product enjoyed a presence across 100+
countries and exports accounted for 43% of the Company's revenues in FY2018-19.
We made a decisive investment related to our European footprint. We acquired Decolan
SA., a distribution and marketing company in Switzerland (acquired through our Singapore
subsidiary on 14th May, 2019). This acquisition was in line with the Company's conviction
that progressive investments in tangible assets will drive the Company's revenues, market
share and competitiveness.
What made the Decolan SA acquisition attractive is that the Company has been an
importer and distributor of laminates and allied categories (compact laminates, faade
products, etc.) for seven years, servicing growing Central European demand in Switzerland,
Italy, The Netherlands, Belgium, France and Sweden etc. This acquisition will deepen our
presence in a market where we do not have a distribution arrangement, strengthening our
exports.
Strengthening investments
At Greenlam, we continued to plug business gaps with timely investments during the year
under review.
One, the Company engaged in capital expenditure with the objective to generate larger
throughput by modernising and debottlenecking capacities. Two, the Company made
investments in the S/4HANA version of SAP, which represents a superior digital platform
generation that will mine data deeper and enhance the quality of our decision-making.
Three, we invested in the customised development of products (laminates, veneers and
doors) for specific markets, the benefits of which will begin to reflect from the current
year.
Four, we relocated our headquarters from downtown New Delhi to Aerocity, which provides
us with superior access to modern infrastructure, interdepartmental co-ordination and
excellent connectivity.
Five, we commissioned an Experience Centre in downtown Kolkata with the objective to
provide consumers with a modern experiential environment in which to appraise the entire
range of our products and simulate their application into their desired interior
environment. We believe that this form of consumer engagement is futuristic; Greenlam was
possibly the first within the country's laminate business to commission an Experience
Centre of this standard.
Investing in responsibility and sustainability
At Greenlam, we believe that the sustainable companies of the future will be those that
reconcile their growth with the protection of the environment. As global standards and
regulations become increasingly stronger, it will be binding on companies to moderate
their carbon footprint. Greenlam took a number of proactive initiatives towards making
this a culture even before this became a sectoral standard. For instance, the Company
introduced Green Guard Certification of its products from FY2006-07, which validated that
the products of the Company meet rigorous third-party chemical emissions standards,
helping reduce indoor air pollution and the risk of chemical exposure. The Company
invested in cutting-edge technologies that moderated material consumption and achieved
product quality right the first time.
Besides, the Company moderated water consumption across its manufacturing process and
installed renewable energy (solar power) generation capacity of 955 kilowatts. We believe
that this priority will only strengthen our recall as a responsible brand that is not only
about being good to look at but also good for the earth and its environment.
Overview
At Greenlam, we foresee a stronger performance across the foreseeable.
We expect that demand will progressively revive; we possess adequate capacity and
capability; we are present across a diverse range of products; we will focus on enhancing
a cross-sale of products; we expect to enhance the proportion of value-added products in
our portfolio; we intend to control receivables and inventories with the objective to
maximise cash flows, margins and profits. We intend to maintain the integrity and
robustness of our Balance Sheet which will ensure sustainable future growth.
Saurabh Mittal
Managing Director & CEO