Thread by @TYMFinance

Sheela Foam conducted their concall for Q2 FY 22

Here are the conference call highlights 👇🧵

Business Updates:

• Mr. Tushaar Gautam is the new CEO of the co.
• Co. has formed a 100% subsidiary International Comfort Technologies Pvt. Ltd. to cater the new businesses like export, rural business in India and the e-com business.
• All subsidiaries continue to do well.

Industry Updates:

• Entire supply chain remain tight from crude to raw materials (Polyol & TDI) such that it is lending a loss.
• Disruptions in China is going impact to the instability.
• At the beginning of Q2 RM prices drifted up, after it stabilized & again started rising

B2B Foam Business:

• Segment is fragmented in certain area, however every product with multiple use creates niche for Sheela Foam
• Foam in auto industry & in packaging have technicalities, where co. has edge in market
• Co. has 6 location in India which help in freight cost.

• Co. has 40% market share in Australia, & in India the industry is fragmented. Apart from top 5 players, market share is fragmented.
• B2B businesses are completely dependent on the user industry

Costing Impact:

• RM volatility was difficult to predict, not only the PU
Foam industry or mattress business, but across the spectrum.
• Margin remain protected due to combination of price increase as well as softening of the raw material.

Price Hike:

• To combat increase in RM price co. has taken some price hike.
• Bit of lag kind of a situation to pass on the price.

Geographic Mix:

- Australia which was impacted for at least 2 month due to corona, has made a strong recovery
Australia is a pretty stable mature market & the market is matured

- Lesser impact as far as Spain in concerned.
Spain definitely excites because of its small location

ESG Product:

• Cotton and latex are in a way toxic. For cotton fertilizer is used for growing.
• Organic cotton may take at least 2 decade in India.
• Polyol in foam is nontoxic as very little energy is used.

Strategy:

To increase the market share, co. is actively looking to tap the unorganized market share, by

- Introducing Newer Product
- Strengthening the retail consumer experience
- Looking for exports market
- E-com market- being the late entrants, there seems big opportunity.

CAPEX:

• For Jabalpur plant, full capex proposed of 150 - 200cr & maintenance capex of 30 - 40 Crores.
• Spain expansion programme is under review.