Havells Q2 profit slips on high input costs but sales up 31%

Havells India Ltd, one of the largest electrical equipment and home appliance makers in the country, posted a decline in its earnings for the quarter ended September 30 even though its revenue shot up during the period.

The company said on Wednesday its consolidated net profit for the second quarter fell 7% to Rs 302 crore from Rs 326 crore in the quarter ended September 30, 2020.

This was largely due to a sharp rise in input costs that rose more than 50% during the quarter and comprised two-thirds of total expenses as against 60% in the past.

The company’s revenue from operations, however, shot up 31.6% to Rs 3,238 crore during the second quarter.

Revenue was driven by a 46% rise in sales of its mainstay cables business. Sales from the cables business, which comprises a third of total business, increased to Rs 1,144 crore from Rs 784.67 crore a year earlier.

The Lloyd Consumer business unit, which it had acquired to gain entry into consumer electrical equipment and larger appliances sector, sported 23.5% growth over the year-ago period. The Lloyd unit, which was making nominal profits previously, again slipped into the red last quarter.

Shares of Havells declined 1.35% to close at Rs 1,405.35 apiece on the BSE in a weak Mumbai market on Wednesday. Still, the shares have doubled over the past year. The company declared results after markets closed.

Havells Q2: Other key highlights

1) Sales from the lighting and fixtures business grew 32% year-on-year.

2) Sales from the electrical consumer durables unit, which comprises products like fans, rose 26% to Rs 730 crore.

3) The switchgears business recorded an increase of 21% in sales to Rs 448 crore during the quarter.

4) The electrical consumer durables wing, which is one of the more profitable units, and the cables and switchgears division posted modest growth in profit.

5) The lighting business, in contrast, posted a 47% increase in segment profit.

Havells' omnichannel strategy, rising costs

The company said that it has clocked healthy growth across business verticals and that its omnichannel strategy including online, rural, modern trade and enterprise business penetration is playing out well, adding new customers and broad-basing demand channels.

Havells also noted that there has been increased conversion in projects and the B2B segment.

On the flip side, it pointed out the increase in commodity cost remains unabated with severe escalation in a rather short period.

“Price increases have been staggered creating a lag effect on margins. However, we maintain a positive outlook on demand growth which could support margin as well,” it added.