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Refrigeration Products Help Us Perk Up Profits, Says Blue Star MD Thiagarajan

Air conditioner maker Blue Star reported a twofold jump in its consolidated net profit to Rs 79.84 crore for the fourth quarter. B Thiagarajan, MD of Blue Star, spoke to CNBC-TV18 about the company’s financial performance.

You are a cool breeze of growth in an otherwise hot area which is parched with not-so-good consumption numbers coming in from most quarters. Tell us what went right, is the improvement simply because the summer is worse?

As I mentioned in the third quarter itself, we were confident that the revival of demand will take place in Q4. Of course the summer set in only in the last two weeks of March. Our performance was more than expected basically because of the refrigeration products. Room air conditioner demand picked up, but it will peak sometime in April or May, but March changed it completely because of refrigeration products and the professional electronic segment doing well.

Have you been able to take any price hikes recently and is the worst of the margin pressure now behind us?

I do not think we could pass on the entire price increase because the competition continues to be intense. On the other hand, we went ahead with certain cost control measures including rationalisation of certain portfolios, redesigning certain products, and productivity improvement within the company.

Margins have done well, what would you attribute it to? Is it that there were some cost efficiencies that you could garner or is it that you were selling more high-value products?

You are absolutely right. It is the product mix actually. The share of deep freezers and cold rooms was very high. The share of certain inverter air conditioner products was high during the Q4.

What about market share in the air conditioner space, what is it now and have you gained any market share over the last couple of months?

We have gained, from 11.5 percent we moved to 12.3 percent, in room air conditioners. That is our estimate. The final figure should be known in a couple of weeks or so. We gained market share in variable refrigerant flow (VRF) air conditioners. It went from 15 percent to 17 percent.

In chillers, it went from 13 percent to 15 percent. However, there is significant improvement in deep freezers driven by Quick Service Restaurants segment actually and ice cream segment. From 27 percent, the market share went up to 29 percent.

Can you give us some info on the April, May and June quarter? You must have already got orders from your stockists, is it looking better than January to March quarter?

In the April-May-June quarter, I think the growth should be somewhere around 20-25 percent in room air conditioners segment. In deep freezers and cold chain, it is cyclical in the sense that they may do ahead of the season. It may not peak in the month of May or so. However, the room air conditioner demand is extremely good, though I am not seeing it in the air cooler segment for some reason.

What is the capacity utilisation? Do you have to increase capacity anytime now?

For room air conditioners, I think for another 18 months to 24 months we will not be needing additional capacity, but for refrigeration products, basically water coolers and deep freezers, we are expanding our Wada factory.

Are you facing any kind of working capital issues? I mean there was a liquidity crunch a few months ago that was impacting some companies. What is the situation at the moment?

We have done extremely well there. Our borrowing on March 31, 2018 was Rs 286 crore, our borrowing peaked at Rs 511 crore somewhere in the middle of the year. But we closed the year with Rs 287 crore of borrowing. So we are fully under control. Despite the growth, we have maintained our borrowings at the level of last year itself.―CNBC TV18

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