Eveready in ‘comfortable position’ with 80% capacity utilisation

Dry cell battery major Eveready Industries is currently in a “comfortable position” in terms of capacity utilisation standing around 80%, as cheap Chinese imports continue to remain at very low levels. During the third quarter last fiscal, Eveready had registered significant turnover increase over the corresponding quarter of the previous year, with a sharp reduction in cheap Chinese imports.

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“The situation is similar now and going forward imports from China should remain the same. Cheap Chinese imports currently constitute around 3-4% of the overall domestic batteries market. It was around 12-13% two years ago,” Eveready Industries India (EIIL) MD Amritanshu Khaitan said. The significant drop in dumped imports from China was due to the implementation of the quality standards issued by the Bureau of Indian Standards and disruptions caused to the unorganised market amid the pandemic.

“We are currently in a comfortable position in terms of capacity utilisation in batteries segment. Capacity utilisation levels stand at 80%. But we are short on AAA batteries,” Khaitan told FE. EIIL is currently setting up a new production line for AAA batteries at its existing plant near Bengaluru with an investment of around `15-20 crore. With a capacity of 150 million batteries per year, it is likely to start production from May. AAA batteries are usually used in remotes, toys and pulse oximeters.

The company, a flagship of the financially stressed Williamson Magor group, has a total production capacity of over 1.5 billion batteries per year. Its manufacturing facilities are located in Kolkata, Lucknow, Assam, Noida, Haridwar and Bengaluru.

“Historically, the January-March quarter is the period, demand remains lower for battery usage,” Khaitan said, adding demand for batteries and flashlights was expected to improve in the second quarter this fiscal backed by the monsoon season and during that time the company was expected to be operating at near full capacity.

According to a note of credit rating firm India Ratings and Research issued in January, EIIL reported an Ebitda margin of 18.1% in H1FY21, a significant jump from the 8.4% reported during H1FY20, aided by a better product mix, reduced cost, softening of input prices, and the price hikes the company implemented. “We are working on higher Ebitda margin. We should continuously see some improvements for the full year (FY21) over the last financial year. For the full year also we should see that kind of jump, from around 8% to around 17%, on the back of better product mix, cost conservation, trimming of losses of appliances and improved margins in lighting business,” the MD said.

Notably, Ebitda margin for the battery segment was healthy at 27.5% on a turnover of `214 crore during the third quarter last fiscal. The company expects for the full year of FY21, Ebitda margin for the battery segment would also be better. Khaitan, however, said as many states have already imposed lockdown-like restrictions due to the ongoing second-wave of Covid-19 pandemic across the country, it remains to be seen that how consumption reacts going forward.

“We are working on a hybrid distribution model, basically the frontline teams are going to the markets and a lot of the back offices and the support teams are working from home. We are monitoring at a localised level. There is no fixed policy across the country. Depending on situation, we are taking decisions at the state and city levels.” he added.