Dodla Dairy Ltd (DODLA) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator: Ladies and gentlemen, good day and welcome to Dodla Dairy Limited Q2 FY27 earnings conference call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not guarantees of future performance and involves risk and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal
Moderator: operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Dodla Sunil Reddy, Managing Director. Thank you, and over to you, sir.
Dodla Sunil Reddy (Dodla Dairy Ltd): Thank you very much. Good morning to all the participants. On behalf of Dodla Dairy Limited, I extend a warm welcome to everyone joining us today on our call. I would also like to take this opportunity to wish everyone a very happy and prosperous Diwali. On this call, I'm joined by our CEO, Mr. B.V.K. Reddy, CFO Mr. Murali Mohan Raju, and SGA, our Investor Relations advisors. I hope everyone had an opportunity to go through the financial results and investor presentation which have been uploaded on the stock exchange and our company website. Coming to our performance during Q2 FY '27, we reported a revenue of 1,196 crores, registering a healthy year-on-year growth of 17.4%. EBITDA and PAT for the quarter stood at 64 crores and 37 crores respectively. The performance was a combination of volume growth as well as some improvement in the realization, which is supported by a price increase of rupees 2.5 per liter implemented during the fag end of the second quarter. Full impact of the price increase is expected to be visible in the next quarter. However, the milk procurement price increases also remained elevated, keeping the profitability under pressure. Additionally, the margins are compressed due to the inflationary environment in terms of logistics costs, packaging costs, and other overheads. Despite a challenging and uncertain operating environment, Dodla achieved healthy revenue growth, demonstrating strong market presence, superior product quality, farmer relation, and execution expertise. The raw material supply stayed healthy during the quarter, as we strategically built adequate inventory to cater to the demand in the upcoming quarters. Coming to our value-added portfolio, the revenue from this category grew 11.7% on a year-on-year basis. However, the demand for the higher-margin summer-related products such as curd, buttermilk, flavored milk, ice cream, etcetera, remained softer as compared to the previous quarters due to seasonality factor. We are focused on strengthening our existing VAP portfolio and expand into well-established categories like paneer and ghee, where the demand is stable throughout the year and there is potential to build scale over time. Moving on to our Africa business, it delivered an strong quarter with a record of rupees 179 crores, representing a year-on-year growth of 56%. We continue to focus on strengthening our presence across Uganda and Kenya. The plant Greenfield expansion in Uganda is expected to support growing demand and provide additional capacity for future growth. In Kenya, our focus remains on increased market penetration and strengthening our own procurement network. I would also like to inform you that the board has approved a proposal to establish a joint venture in India with Meadows India Holdings Limited with Dodla Dairy and Meadows India Holdings Limited having an equity stake of 40 and 60% respectively. The proposed joint venture will focus on marketing and selling high quality dairy ingredients to the B2B market. The proposal is subject to execution of joint venture agreement, completion of the requisite formalities, and the receipt of applicable regulatory and statutory approvals, if any. We will all- we will keep you informed about any future material development in this regard. Going forward, the operation environment remains dynamic with elevated raw milk prices and inflationary pressure arising from geopol- geopolitical uncertainties continuing to pose challenges. We remain focused on strengthening our procurement and distribution capacities capabilities, sorry, driving operational efficiencies, expanding our value-added product portfolio, and executing our planned expansion initiatives, while which are progressing as planned. With a disciplined approach towards product quality, cost management, capital allocation, we remain committed to strengthening our market position and deliver long-term profitable growth. With this brief, I will now hand it over to the CEO of our company, Mr. B.V.K. Reddy. Thank you very much.
B.V.K. Reddy (Dodla Dairy Ltd): Yeah. Thank you, Mr. Sunil Reddy. And happy Diwali to everyone. I will now walk you through the quarter performance highlights of our business. Starting with our Indian operations. The overall milk supply situation began to improve during the quarter, supporting to recovery in our milk procurement volumes. For Q2 FY '27, the milk procurement stood at 21.3 lakh liters per day, registering year-on-year growth of 9.3%. Average milk procurement cost increased Rs. 43.2 per liter in Q2 FY '27 compared to with Rs. 41 per liter in previous quarter and 37.3 per liter in
B.V.K. Reddy (Dodla Dairy Ltd): FY '26. In response to the rising procurement cost we implemented the price increase of approximately 2.5 per liter. Consequently, our average milk sales realization improved to 61.9 per liter in Q2 FY '27, compared with 59.4 per liter in the previous quarter and 57.3 per liter in the corresponding quarter of last year. However, the increase in selling price was not sufficient fully offset the impact of the higher milk procurement cost and profitability, therefore, remained under pressure during the quarter. To put this into perspective, the spread between the milk sales realization procurement cost narrowed to 18.7 per liter in Q2 FY '27, compared with Rs. 14 per liter in Q2 of FY '26. In addition, operating cost remained elevated primarily due to input cost inflation and shift in product mix from bulk sales towards milk value added products, VAP. Cost related transportation, fuel, packaging, minimum wages and other overheads continue to remain higher than the normal level. Going forward, we intend to gradually pass on the portion of these costs to increase the consumers over the next coming months. Our pricing strategy remains aligned with the broader industry trends, where high single digit price hikes have been taken by the regional cooperatives. We will continue to maintain a balanced approach to consumer affordability and profitability. Coming to Orgafeed Dairy, the business delivered healthy revenue growth and during the quarter and supported by strong milk sales volume, although profitability remained muted due to elevated raw material cost, witnessing a similar trend as our domestic dairy business. Speaking of our Orgafeed business, it is continued to deliver a strong growth with revenue increasing 40% on year-on-year in FY in Q2 FY '27, however, margins were impacted by higher raw material cost, which could not be fully passed on to the farmers. We're also exploring opportunity to expand our feed business in Maharashtra once our new integrated facility becomes operational. Our Africa business delivered very strong revenue growth of 56% on year-on-year, largely driven by a 68.5% increase in milk sales, as Mr. Sunil Reddy mentioned earlier. In Kenya, we continue to focus on gaining market share through strategic pricing, while simultaneously strengthening our market presence and procurement network. These targeted efforts are supporting our growth momentum and positioning the business for future expansion. So now coming to the product sales mix, our milk sales volume stood at 14.2 lakh liters per day registering year-on-year growth of 8.4%. During the quarter, our VAP sales increased to Rs. 327 crores from 292.8 crores of Q2 FY '26, while curd and curd based products recorded high volume growth of 23% year-on-year, reaching 444.7 metric tons per day. Demand for our consumer oriented products across the broader VAP portfolio moderated during the quarter due to seasonal factors as Q2 coincides with monsoon season. Looking ahead, with milk availability improving and festive season approaching, we expect demand for the certain VAP categories, particularly sweets, ghee and other festival-oriented products to benefit. We remain focus on capitalizing on these opportunities while maintaining the cost discipline and the optimal pricing strategies. Further, as our new facilities in Maharashtra and Uganda become operational, we expect them to be accelerate our growth and contribute to a stronger, more profitable performance in the years to ahead. Now, I would request our CFO, Mr. Murthy Mohan Raju to share the financial highlights for the quarter. Thank you.
Murali Mohan Raju (Dodla Dairy Ltd): Thank you, Mr. B.V.K Reddy, and a very good morning to all the participants on the call. I wish everyone a happy and prosperous Diwali. Talking about consolidated financial performance in Q2 FY '27, revenue from operations stood at 1,196 crore reflecting a year-on-year growth of 17.4%. Gross profit for the quarter amounted to
Murali Mohan Raju (Dodla Dairy Ltd): FY '27 from 49.9 crores in the corresponding quarter last year registering an year-on-year increase of 10.1% mainly due to people addition for Orga as well as labor code. Subsequently, the employee cost remained in line. Other expenses for the quarter stood at 156.6 crores as against 139.3 crores in the corresponding quarter last year. Although other expenses remained broadly stable as a percentage of revenue, the increase in absolute terms was mainly attributable to higher overhead costs per liter due to inflation and geopolitical situation. In addition packing material cost rose 41.6% year-on-year for the quarter owing to macro factors and changing product mix. EBITDA for the quarter stood at 64.1 crores translating into an EBITDA margin of 5.4%. Depreciation expense for Q2 FY '27 increased to 23.6 crores compared to 20.6 crores in the corresponding quarter of the previous year. Other income for the quarter amounted to 10.9 crores. Net profit for the quarter stood at 36.6 crores with the net profit margin of 3.1%. Now moving on to our H1 FY '27 performance. Revenue from operation grew by 18.2% year-on-year to 2,394 crores compared to 2,025.7 crores in the corresponding period last year. Gross profits today 554 crores with the gross profit margin of 23.1%. EBITDA stood at 129 crores while profit after tax stood at 77.2 crores translating into a PAT margin of 3.2%. In H1 FY '27, we recorded a deferred tax charge of 5.77 crores which includes 4.6 crores in CDDL that is a first-time deferred tax liability de-capitalization and 1.17 crores in HR Food due to a tax rate change. During the period, we incurred capital expenditure of 66 crores primarily towards our Maharashtra expansion project. As of September 2026, we maintained a healthy cash and bank balance of 659.4 crores which is sufficient for our future capex requirement. In H1 FY '27, we are able to build up inventory of 76 crores which includes SMP and butter for our future requirement. As of September 2026, our inventory stood at 232 crores. With this, we conclude the presentation and open the floor for further discussion.
Moderator: Thank you very much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
Moderator: Ladies and gentlemen, we'll now begin the question and answer session. Anyone who wishes to ask a question may
Moderator: The first question is from the line of Abhishek Mathur from Systematic. Please go ahead.
Abhishek Mathur (Systematic): Yeah, hi sir. Good morning, and thank you for the opportunity. Sir, I have noticed that our gross margin trend for the past three quarters has been quite firm. Gross margins have stayed in that range of 23% or so despite the high raw material inflation that we've seen. In that context, the question was that, you know, what is now our outlook on the milk procurement cost? What is the trend that we are seeing in October and for the next one to two months? And, and with our gross margin maintenance background in mind, what would be the pricing approach here? Can we assume that we will take price hikes equivalent to the sequential increase in milk procurement costs in the near term? Just wanted some clarity on that.
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