Summary of earnings call for LT Foods Ltd published on 01 Aug, 2025

LT Foods Limited
Q1 FY26
Call date · July 28, 2025

1 · Management Commentary

Key Positives

• Achieved highest ever quarterly revenue (INR2,501 crores, +20% YoY) and EBITDA (INR302 crores, +17% YoY).
• Strong growth in Basmati & Specialty Rice segment (+18% YoY); organic business up 32% (majorly soya meal).
• Successful launch of Nature Bio Foods facility in Rotterdam, targeting EU organic market.
• Household reach of Daawat brand increased to 56.2 lakh homes (March 2025) from 45.56 lakh (March 2023).
• Kari Kari snacking segment grew 40% YoY; completed acquisition of remaining 45% in Golden Star, now #1 Jasmine rice brand in US.
• Robust performance in Europe (+57% YoY, aided by UK plant); North America (+32% YoY, normalized 18%); India (+10% YoY, 25% market share in Western region).

Key Negatives

• EBITDA margin declined 30 bps YoY to 12.1% due to increased brand investments.
• Middle East revenue declined 33% YoY, mainly due to discontinuation of some private label business.
• RTH/RTC segment degrowth due to discontinuation of Daawat Sehat product.

Forward Guidance

• Capex: New US RTH/RTC plant to be operational in 2–3 months; ongoing investments in brand and distribution.
• New products: Launch of Biryani Rice, Thai curry rice kit, and expansion in rice crackers/snacking.
• Client wins: Secured partnerships with 4 leading UK retailers.
• Revenue/margin: Guidance of 12.5–13% EBITDA margin; double-digit growth in US; PAT CAGR guidance of 21%, EBITDA CAGR 16%; ROCE target of 23%+.
• Strategic: Focus on branded business in Middle East; continued global expansion; inorganic growth in Basmati, Specialty Rice, Organic, and RTH food segments.

2 · Q&A Highlights

Q 1 (Composite): What drove the increase in SG&A and brand spend, and how are freight/logistics costs trending?
A (Management):
• SG&A as % of revenue increased by 1.2% YoY, mainly due to higher brand investments.
• Brand spend as % of revenue up 120 bps YoY; logistics cost as % of revenue reduced by 90 bps YoY.
• Freight cost at 5.7% of revenue, expected to remain stable for the year.

Q 2 (Composite): Impact of Pakistan’s water crisis and paddy price trends on inventory, margins, and future pricing?
A (Management):
• No significant impact from Pakistan; India remains dominant in exports.
• Current paddy inventory at INR29/kg; market price INR34–35/kg.
• Inventory gains/losses minimal due to procurement strategy; margin guidance maintained.

Q 3 (Composite): Middle East performance and strategy—reasons for degrowth and future outlook?
A (Management):
• Degrowth due to discontinuation of low-margin private label business; branded business in Saudi growing (INR16 crores this quarter, up from INR3 crores private label last year).
• Focus remains on own brands; Middle East is a mature, high-entry-barrier market but seen as a long-term opportunity.

Q 4 (Composite): US and Europe growth drivers, normalization post-acquisitions, and HoReCa/home consumption mix?
A (Management):
• US growth (32% YoY) includes Golden Star acquisition; normalized growth 18%.
• Europe growth (57% YoY) driven by new UK facility and contracts; normalized growth 24%.
• HoReCa contributes ~20–25% of global revenue; rest is home consumption.

Q 5 (Composite): RTH/RTC segment performance, break-even outlook, and new product launches?
A (Management):
• Degrowth due to discontinuation of Daawat Sehat; segment to break even at INR350 crores annual sales (expected in 2–3 years).
• New US plant to drive growth; new products launched in India and US.

Q 6 (Composite): Working capital/inventory days and initiatives for efficiency?
A (Management):
• Inventory days at 277, considered normal due to aging requirements in basmati rice; expected to reduce post-harvest.

Q 7 (Composite): Details on segmental revenue, basmati vs. specialty rice, and sourcing?
A (Management):
• Of INR2,124 crores in Basmati & Specialty, 85% is basmati, 15% other (mainly Jasmine).
• Basmati mainly sourced from India; <10% from Pakistan (EU operations).

Q 8 (Composite): Guidance on PAT vs. EBITDA growth and ROCE outlook?
A (Management):
• PAT expected to grow faster than EBITDA due to lower proportional growth in interest/depreciation.
• ROCE target of 23%+ (from 21% currently).

3 · Other Key Numbers

• Q1 FY26 Revenue: INR2,501 crores
• Q1 FY26 EBITDA: INR302 crores
• Q1 FY26 EBITDA margin: 12.1%
• Basmati & Specialty Rice revenue: INR2,124 crores (85% basmati, 15% other)
• Organic business growth: 32% YoY (soya meal major contributor)
• Europe revenue: INR376 crores (rice & specialty segment, Q1 FY26); Q1 FY25: INR239 crores
• Incremental UK sales: INR80 crores (Q1 FY26)
• North America revenue share: 43%; growth: 32% YoY (normalized 18%)
• India revenue share: 31%; growth: 10% YoY; volume growth: 13% YoY; realization decline: 2% YoY
• Middle East revenue: 8% of total; Saudi revenue: INR16 crores (Q1 FY26), prior year INR3 crores (private label)
• Inventory as of June 30, 2025: 285,000 tons paddy (avg. INR29/kg), 300,000 tons rice (avg. INR51/kg)
• Household reach of Daawat: 56.2 lakh homes (March 2025)
• Royal brand US basmati import share: 54%
• HoReCa contribution: 20–25% of global revenue
• RTH/RTC segment break-even: INR350 crores annual sales (expected in 2–3 years)
• Gross margin: Q1 FY26 YoY improvement of 70 bps; QoQ decline of 200 bps (due to organic/soya meal mix)
• Brand spend: 3–4% of revenue (average plan)
• ROCE delivered: 21%+ (Q1 FY26); target 23%+
• Soya meal litigation: Decision expected by October end 2025
• Supreme Court credit: INR190 crores received, backed by bank guarantee
• EBITDA margin guidance: 12.5–13%
• PAT CAGR guidance: 21%; EBITDA CAGR: 16%
• Next earnings call: Semiannual from Q2 FY26

Note: This is an AI generated summary of the earnings call. There may be inaccuracies in the summary. Please refer to the original transcript before making investment decisions.