Ladies and gentlemen, greet you and welcome to EPL Limited Q3 FY23 Earnings Conference Call hosted by Systematix Institutional Equities. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Pratik Tholiya from Systematix Institutional Equities. Thank you, over to you, sir. Thank you, Tanvi. On behalf of Systematix Institutional Equities, I would like to welcome all the participants who've joined into this conference call of EPL Limited for Q3 and 9-month FY23. On the call we have with us Mr. Anand Kripalu, MD and Global CEO, Mr. M. R. Ramasamy, COO, Mr. Amit Jain, CFO, Mr. Suresh Savaliya, SVP, Legal and Company Secretary, Mr. Deepak Ganjoo, President, AMESA Region. I would like to request Mr. Anand Kripalu to start the proceeding with his opening remarks. Thank you. Over to you, sir. Thank you very much, Pratik, hello everybody, a warm welcome to the Q3 FY23 earnings call. In the quarter under review, the operating environment remains challenging in some areas while easing in other areas. In overall terms, the challenges of the past are clearly reducing, and things are surely and steadily moving in the right direction. Importantly, all our cost-saving efforts have also started bearing fruit. With this context, I am very pleased to report solid results in terms of revenue growth and profit. Excluding EAP or East Asia Pacific, which continue to be impacted by COVID challenges, we posted double-digit revenue growth of 12.1%, which is 12.7% at constant currency. AMESA grew by 9.2%, Americas at 19%, and Europe at 10.3%. EAP revenue declined by 8%. Overall, top line growth was 7% on a reported basis and 7.8% at constant currency. Importantly, on a YTD basis, the personal care and beyond category has continued to grow faster than all and now accounts for 47% of our business. Above all this, after six quarters of decline, we have delivered double-digit EBITDA growth and double-digit PAT growth. Excluding the impact of setup costs in Brazil, EBITDA was 16.6%, a rise of 91 basis points versus the same quarter of last year and 33 basis points sequentially. Importantly, absolute EBITDA was 13.2% higher than previous year. PAT at INR 639 million was also 11.9% higher, which included certain one-offs. Adjusted for these one-offs, PAT was 15.9% higher than the previous year. During the quarter, performance in Europe was impacted partly by normal softening in the Christmas quarter that happened every year and partly due to order postponement by a few customers. Results are expected to bounce back in Q4. Including Brazil, EBITDA margin was similar at 15.6%. Absolute EBITDA was 12.9% higher than the previous year, and PAT at INR 628 million was 10% higher. Brazil is concerned, our plan for Brazil remains pretty much on track with customer trials now underway. We have included photographs of the plant in the investor deck for your perusal. Innovations and business wins are concerned, we have continued to pursue orders for the NEOSeam technology, which allows 360-degree printing. Fresh commercial orders have been received in Europe and America. Many other innovative technologies are in the pipeline as we continue to lead the pack in innovation, be it tubes, printing, caps or indeed any other tube-related technologies. Some examples are also included in the deck. This quarter, our teams also received several awards and certificates of appreciation from customers like Colgate and Abbott. We continue to lead the pack on product sustainability. We are on track on our ambition to double Platina, accounting for close to 10% of our volumes. Our commitment to sustainability remains our high priority. It is encouraging to get external validation for our efforts to build a circular economy. I'm therefore delighted that EPL has received a rating of A-, which is in the leadership band by CDP, formerly the Carbon Disclosure Project, for performance on climate change. This is an improvement from the B rating last year and is amongst the best in the packaging industry. Also, the Ellen MacArthur Foundation has accredited EPL with a positive rating in progress on all its annual commitments towards the reduced reuse and recycling targets. On EcoVadis, on the back of our company-wide Go for Gold effort, we are confident that we will achieve a gold rating this year. Overall, we continue to make substantial progress towards our ambition of becoming the most sustainable packaging company in the world. This will be our route to building sustainable competitive advantage and long-term profitable growth. Looking ahead, the last many quarters have been exceptional in terms of external challenges and headwinds. While many of these are easing, several do remain. Specifically, the cost environment in Europe and inflation in the U.S., which requires continued effort on pricing. COVID in China is expected to continue to have an impact over the next few months and will be compounded by the annual Chinese lunar holidays this quarter. The general view is that China will bounce back very strongly. Importantly, India, a key part of our business, has performed strongly thus far and this is expected to sustain. While there is much talk about a global recession, we are thankfully not seeing any signs of it yet. As we look ahead, we will continue to keep one foot on the accelerator of growth and the other foot on the brake of costs. Specifically, our priorities include to deliver double-digit revenue growth as China recovers, price increase actions to cover inflation-related cost increases, particularly in Western geographies, continued focus on margin improvement through mix and cost efficiency. With supply chains easing, we aim to optimize capital allocation by sharply reducing inventory and further strengthening our assets. We will sustain focus on customer conversion to sustainable solutions while at the same time making EPL as a company even more sustainable. Considering all these factors, we remain cautiously optimistic about the future. We have faced a huge set of challenges over the last couple of years and are clearly coming out of all this stronger. We remain committed to continuous improvement so as to deliver sustained profitable double-digit growth with margin recovery. With that, we will open up the lines for questions. Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use hands-free while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Sanjesh Jain from ICICI Securities. Please go ahead. Yeah, good afternoon, sir. Thanks for the- Good afternoon. Couple of them from my side. First, on the EAP side, now that China has opened up, the things have eased up a lot. With this do we expect EAP coming back to a stronger growth starting Q4, and have we started seeing early signs of it now that we are already more than one month into that? That's number one. We talked about order postponement. I think missed it. I mean, can you elaborate what was that? This is my first question. Okay. Let me take that. EAP, do we expect a bounce back? Absolutely, we expect a bounce back, right? Q4 is hard for me to comment and I want to be careful that I don't give anything more than is appropriate on this call. What I said in my opening comments is that the situation of COVID in China continues as of now, right? Post the Chinese New Year, right, the infections have probably extended to rural areas as well, right? It'll take a couple of months for this to subside. Having said that, factories are now operational again. In this quarter we have the impact of both Chinese New Year, which happens every year in Q4, so that's nothing new. The impact of COVID, which is not behind us. My specific comment was over the next few months, we expect a strong bounce back in China and everything that I am seeing and hearing is pointing to that direction. The point of order postponement was on Europe, where one specific large customer postponed a large volume of orders from Q3 to Q4, and therefore I said we expect a bounce back in Europe in Q4. Fair enough. My second question is on the personal care revenue. It has declined sequentially. What is leading to a decline in the personal care revenue sequentially? I know YTD we have done quite well, sequentially it is down by 6.4% quarter-on-quarter. Is there lower discretionary spend impacting or it's more of a seasonality considering it's a winter season? What's driving the sequential decline in the personal care? Now, my recommendation to you is that when you get into categories, please look at YTD, right? You might have quarter-to-quarter variations and seasonality. The question is the business moving the right direction? Is personal care and beyond growing faster than oral? The answer is yes, right? On a consistent basis, on a YTD basis, the growth of personal care and beyond is significantly more than the growth of oral. While oral has grown, personal care and beyond has grown much faster, right? Directionally each year our contribution from personal care and beyond is increasing, and like I said, YTD it is at 47% this year so far. I don't think there are any concerns. I mean, I just want to say that, you know, this year, given the challenge in China and China actually has a very significant personal care and beyond category, particularly in the area of beauty and cosmetics, right? China, the overall market for the last couple of quarters has been unstable for all the reasons that we know and I don't need to belabor that point. I don't think there are any fundamental concerns, and I think the mix is moving in the right direction for the company. Fair enough, sir. My next question is on the margins. On the one side, we are talking of, reducing inflation both in power and freight costs and supply chain easing up. On the other side, we are talking of taking price increases in the, western part of the world. Say next two quarters should be, touching up to that 18% kind of a margin, considering it's a, it's a effort which may lead into a very quick result. I'm not going to give you a number because I shouldn't be giving you a number, and probably I cannot give you a number. Our aim absolutely is to progress our margins and bounce back as quickly as we can. Price increases are to do with inflation in energy and wage costs. General inflation related costs. You know, the general inflation in the U.S. is still the highest that it's been in decades, right? Therefore, there are cost increases associated with that, and that requires specific price increases from key customers, which we are pursuing and also getting. That effort has to continue as far as Europe is concerned as well. Overall, what I would like you to think about is the fact that. I can't tell you one quarter or two quarters. Overall I think what I would like you to think about is the fact we've delivered 15.6% margin in a quarter where we have had significant challenge, right? In Europe for all the reasons we've discussed and specifically in Europe this quarter for reasons that we've discussed. If you have to think about this business and what it can deliver, right, when things come back to normative levels of performance, right? I think that should give you an answer in itself. Fair enough, sir. Last question from my side. On the Brazil side, now that we have started doing the customer trials, a commercial billing can be expected starting next quarter? Yeah, next quarter, definitely. Even this quarter towards the end, you know, there will be a trickle of commercial billing, if you like. The real volumes will start. I can tell you that the customer is hungry and waiting and, you know, will lap tubes the moment we're able to produce it. In fact, we've had other positive news from the same customer, of wanting to give us more volume on other categories and also from other customers as well. Actually, you know, in a very difficult country like Brazil with all kinds of uncertainties, even Indians' taxes, complicated, you ain't seen nothing if you haven't seen Brazil. I think our teams have done actually a great job in managing this project, and the photographs are there in the deck, right? To get ready for production. Actually we feel confident as we close into the start. Right now, by the way, tubes are already coming out of our line, right? Where we are doing checks and tests and so on and so forth, right? It's not as if tubes are not coming out of the line, but the customer is doing their own evaluation of the plant and the tubes and so on and so forth. I expect that next quarter, yeah, we will start seeing, I can't say now, but I think meaningful volumes coming out of the Brazil plant. Got it, sir. Thank you very much for answering all my questions and best of luck for the coming quarter. Thank you very much. Thank you. Ladies and gentlemen, if you wish to ask any questions, please enter star and one. The next question is from the line of Sameer Gupta from India Infoline. Please go ahead. Hi, sir. Good evening, and thank you for taking my question. Two from my side. These pricing suite efforts with non-contracted customers, where are we in this journey? Assuming that the current level of RM price is sustained, how much more price hike do we envisage? Any quantification, any numerical to this point will be helpful, sir. I don't think we are in a position to specifically quantify. What I will tell you is this: We have got a good part of the pricing increases that were due to us from non-contracted customers. However, in some parts of the world, like I said earlier, there is continuing inflation and continuing cost increases and therefore continued effort to get pricing. Okay? You know, in some cases there has been delay, but now we've started getting a lot of that pricing through. Right? If you look at just the growth, you will realize that there is a good part of pricing as well coming through. Okay? I would say that pricing is an ongoing challenge, an ongoing journey. Apart from new costs that are coming, right, we have got a good part of the pricing. In fact, if anything, there is some tempering of input costs right now. It hasn't gone back to pre-pandemic levels. There is obviously the foreign exchange issue of the INR versus the dollar. Therefore, the absolute benefit of raw material softening is not as much as we would like, but it is there, right? Therefore, you know, that's the other thing that's going to help us to make sure that the pricing that we've recovered is adequate to cover the cost, right? Wherever there's new costs, we are taking efforts to get new pricing. Right? I can't quantify this more sharply. That's very helpful, sir. Second question from me is that now going forward and now Q4 onwards, we will now be starting to enter a period where price hikes that we have already taken, at least in the contracted part and subsequently the non-contracted part, they will start to anniversarize. Now, I understand that there is a polymerization angle, there is a personal care growing at a higher pace than oral care angle. Do you see delivering a double-digit growth in the medium term a part of a challenge in the current demand environment, given that there will be anniversarization of price hikes taken? You are absolutely right. There will be lappings of price hikes. If you take the case of at least this last, year or so, right, price increases have happened through the course of the year. At any point you will not be lapping the full year of price increases. You'll be lapping some quarters of price increases. Okay? Clearly the revenue growth in the future has to come as a combination of three things, right? Some level of volume growth, some level of price growth, which will become less and more modest, and some level of mix growth. Okay? Actually, we are confident given what we have seen, right, and given our performance despite very, very significant headwinds, right, in a couple of regions in our business, that, you know, as the pricing starts lapping and lapping the previous year, but also as we start coming out of the COVID challenges in China, right, and some of the shorter term challenges that we have faced in Europe. It's not as if the lapping of the pricing will be the only factor. There'll be positive factors as well of the bounce back of regions that have, you know, been challenged for all the reasons that we know. When you look at an aggregate of all this, absolutely. I said this in my own opening comments, we remain confident in the medium term of delivering sustained double-digit growth in this business. Very, very helpful, sir. Just last one, if I can squeeze. I see a sharp deceleration in the revenue growth trajectory in AMESA. Can you give some color on the performance here? I understand that oral care as a category has been under a sort of challenge, but is there anything else in this part of the business that you are facing? Sorry, just repeat that point again. AMESA, the growth, YOY growth has sloped down from 17% to 9% this quarter. I understand that oral care players this quarter in FMCG, they have alluded to a very weak volume. Actually, Dabur has had 4.5% decline this quarter in oral care. Apart from that, is there any other reason that we are seeing a softness in performance? If you could give some color on this. Yeah. Our constant currency growth in AMESA is 13.8%. Okay? And you're aware of the currency challenges. If I step back, as of today, am I concerned about volumes and revenue in AMESA? Actually, the simple answer is no. Right? I have not felt any stress in our month-to-month performance in AMESA, including some of the customers, right? They might have their, you know, their pipelines and so on getting adjusted, and I can't comment on that. As far as our business is concerned across key customers, I think we remain very confident of continuing momentum. I mean, if, oral care, players in India are under pressure, how is it that you're not feeling that pressure? I think it's a simple answer, right? You're right about some of the messages you've given. I'll tell you, we have a portfolio of customers, and we have a very large market share within oral care, right? It is not as if the category is declining on volumes. If somebody is losing, somebody is gaining. Okay? I can tell you there are some companies out there and some brands who are gaining very, very strongly. You may wanna touch them. They may not be listed, I don't know. Okay? There are some customers who are growing very, very strongly. I would say that our volume is an aggregate of all the pluses and minuses of different customers, right? Our volume, given our share, is far more akin to total category growth, right? The other thing, by the way, premiumization is continuing in the category. One is the overall category growth, but the overall category is value growth based on premiumization and therefore a higher revenue per tube. I mean, I can speak for what we are seeing in terms of our own numbers. Okay, sir. Thank you very much for answering my questions so clearly. Thanks. Not at all. Thank you. Thank you. Ladies and gentlemen, if you wish to ask any questions, please enter star and 1 on your touch tone telephone. The next question is from the line of Sumant Kumar from Motilal Oswal. Please go ahead. Yeah. Hi. My question is regarding Europe. We have seen operating losses. Can you talk about how is the scenario, demand scenario in Europe and margin scenario going forward? Hi. I've already commented on Europe in my opening comments, right? I have specifically called out the fact that there has been a volume-related challenge in Europe this previous quarter, right? That loss of leverage, that loss of scale has impacted the overall P&L performance of Europe. Okay? You know, we said it upfront. All I can tell you is that it is not as if that, yes, there's any kind of permanent loss of that business, right? We are beginning to see the volume, and I can share with you that that bounce back is starting in Q4, right? Sitting where I'm sitting and as we speak. It is basically largely to do with volume and scale leverage or de-leverage, if you like, of the P&L, right? This is expected to get much better in Q4. Beyond that, Europe is a challenged region because of the macros in Europe. Okay? Europe is one region where the effort on price increase is a daily affair, right? It's not a monthly or a quarterly affair because it's been a constant increase in costs as far as Europe is concerned. Minimum wage has gone up again, inflation as I told you and so on, and therefore you need to go and get that from the customer. The effort on price increases in Europe, right, is constant, right? Therefore, that's one region where I will never say that we have done the job on price increases at all, right? It's ongoing and our teams have continued to get price increases consistently. You were talking about the Q4 onwards, we have a meaningful contribution from Brazil. Okay. Hello? Yeah. No, I said. Yeah. I said from, not from Q4 onwards. Q4 you might have a trickle of volumes coming out of the Brazil factory as it commissions that plant. From Q1 next year, right, Sumant Kumar? As you'll start seeing, volumes that are a bit more substantive, okay, coming out of that. Still not be operating at capacity. No plant operates at capacity in its Q1. I think the ramp up will start in Q1 next year. That's what I said. Basically what, we had a issue earlier also. The Europe was dragging overall performance and even America was dragging. Now America has started performing and, we have a still problem in Europe. Can we expect, from the next quarter onwards, we have, the, all the geographies, except Europe, there will be improvement? All the geographies going to perform at one go. That is absolutely our effort that every geography must improve and perform better. I agree with you that Europe has been a challenge this quarter for all the reasons we've discussed. Our plans are in place that every region must do better as we move ahead. China probably will do better as the impact of COVID, the shorter term impact of COVID, which is likely to continue for the next few months. As that disappears, right, the general feeling is that we will have a big bounce back in China, and that might really happen Q1 onwards, right? The bounce back, I'm saying as far as I'm concerned. In over the next few months, absolutely, and certainly over the next couple of quarters, we should see all regions performing better than they have been performing right now. As you have taken price increase in the past quarter because the prices was higher, raw material prices were higher. Now prices has corrected. Are you going to for renegotiation for the long-term contract? Prices have corrected, but you know, have corrected moderately, right? One, the polymer prices have also not corrected back to where they used to be. Secondly, part of that has been engaged by the INR to dollar FX. Okay? Where contractually we need to pass on something, right? That you have to do contractually. If there are other inflation-related costs, then our conversation will be more holistic, right? To make sure that we don't give up on polymer-related pricing, right? We also retain other inflation-related pricing. Okay? Clearly based on contract, we will need to do what we need to do, but our conversations will aim to be holistic both for contracted customers and even more for non-contracted customers. Oh. Thank you so much. Thank you. The next question is on the line of Douglas Turnbull from Invesco. Please go ahead. Yeah, thanks. Could you just talk us through what was going on with the tax in this period? I'm not sure if there's some seasonality around that. There seems to be a few moving parts in the financial results. Could you just help us understand how that ended up being quite so low? That would be really helpful. Thank you. Yeah. I'm gonna pass it on to Amit Jain, our CFO, to tell you about the taxing and throw a bit more light on those numbers. Amit? Yeah. The tax is a combination of various assessments which happens. If you see. Normally we should see tax as a YTD or a full year basis because there are quarters there will be pluses and minuses on the tax. If you ask me the full year basis, the effective tax rate will be in the range of, say, 26%-27%. Okay. That's very clear. Thanks so much. Thank you. Thank you. The next question is from the line of Shalabh Agarwal from Snowball Capital Investment. Please Please go ahead. Good evening, sir. Thank you for giving this opportunity. I wanted to get some perspective on our growth. you know, vis-à-vis industry or some of the other leading competitors, we have across the globe. If you can give some idea how you have grown versus the industry last nine months. Shalabh, I don't have specific numbers of how we've grown versus the industry. Okay? Our understanding is that our growth have more than kept up with the industry, so where I would held share, but more likely we have gained share. When you look at our growth versus competitors who have announced results in India and so on, you will see that our growth are ahead, right? Both in India specifically, if you compare India to India results, our growth are ahead. Also globally, when you compare our growth are ahead. Okay? Therefore in overall terms, I would say that we have more than kept pace with the industry based on the data that we have available. Sure, sure. When we say that, you know, we probably have, you know, grown a little higher rate than the industry, not only these nine months, but say over the last couple of years where probably our volume growth has been higher than the industry. This incremental market share that we typically get, is it from new brands or new SKUs or, you know, we end up getting a slice of the business from an existing SKU, existing brand which was probably getting taken by competition. How does that work? Listen, obviously it's a combination of all of these. Existing customers growing and other new customers coming in and sometimes new brands coming in, new SKUs coming in. As you know that, we have had good gains through innovation. Most of those by design are new brands, new SKUs, new formats. Largely speaking because our growth in personal care and beyond, which includes beauty and cosmetic and pharma, is outpacing oral care, right? A good part of the growth, incremental growth is coming from new customers, new business, right? By definition. All right? That's how. Sure. You know, at a very overall level it plays out. Sure. What I was trying to understand more is, you know, at an overall level, you know, given a tube manufacturer or the tube vendor is quite intertwined with the entire product in terms of, you know, I guess the vendors get associated at the time of designing and printing and everything. You know, how easy really is it to get a slice of the business from an existing SKU or an existing brand which is already being, you know, taken by a competitor? Sorry. Your question is how easy is it to get growth from an existing brand versus from a new brand? Is that the question? Yeah. How easy, how easy it is to get growth from, to get a share from competition, given other vendors are also equally intertwined with the principles, with the customer process, you know, from the stage of designing and printing on the tube. So how easy is it to get that business from competition? Yeah. Not easy. All right? This business has high stickiness with customers. Therefore our customers, we have high stickiness with our customers and our competitors have high stickiness with their customers. Once in a while you get a disruptive shift of a significant volume from a competitor to us, right? In the rare occasions we may also lose something, right? By and large, what happens is you grow with your existing customers and hold on to them as best as possible, and it is their business to grow. If you look at some of the top customers in the world, I mean, they have been investing significant marketing dollars to grow their brands and grow their business, and you go with them. Constantly you look at your business development pipeline, which we do regularly, right? Make sure that you capture a higher share of innovation, a higher share of new formats, a higher share of new brands. Okay? That's what we do. Therefore, when you look at the aggregate, that's how you try and grow faster than the market. To unlock a big global customer who's been loyal to another competitor for many, many decades, that's not easy. Equally, it's not easy for somebody to steal a big customer like that from us. Sure. Sir, our, you know, volumes that we expect to get in Brazil, the customer would be getting those tubes from some other vendor, right? Are they committing those volumes to us or these are totally new brands or new products which these customers in Brazil are launching in that market? No, no. Brazil from that customer is 100% share gain for us. Just to be clear. Brazil is not just, you know, shifting from there. It is 100% share gain, right? In terms of volumes particularly that we are gonna get over there, right? Somebody else is supplying that volume right now, right? We will be getting that volume by, you know, setting up a plant that is the fit for purpose plant to supply this customer. Okay. Sir, I was just wondering because, you know, Europe, as you said, is facing a problem and, you know, we are also experiencing that. If you go to, you know, ETMA website, European Tube Manufacturers Association website, you see a lot of names which are private obviously, even Albéa is private to that extent. Probably Albéa is one of the bigger ones. Are you seeing any companies becoming available for M&A, given what Europe is facing currently? I think that's a great question. Listen, we remain hungry for strategic M&A that will be growth and margin accretive. Okay? We remain hungry. We have looked at some companies and ultimately listen, we also have to get the right value for money, right? We have to get it at the right valuation. Okay? We have been hungry to scope out possible M&A opportunity. We have looked closely at a few in Europe to your point, right? It either hasn't had the right strategic fit or not covered the right price. Okay? We absolutely remain open. You're right, in Europe there is a large number of tube makers, right? Some small, some medium, and a couple very large, right? Is that environment remains ripe for M&A and, you know, just watch this space, but we remain absolutely vigilant to try and exploit any opportunity that comes our way there. You know, honestly, it is part of our growth strategy, right? We've only done one in the last couple of years with the CSPL in India. You know, partners in Europe or anywhere else, right, would be appropriate geographies for a targeted acquisition. Sure. Sure. Just to ask me, how big would Albéa be? Like we are close to around INR 34,000 odd crore sales. Would Albéa be half that or where would they be broadly in terms of what your marketing intelligence tells you? You know, we don't have fresh data on Albéa because it is not published, right? Sure. We have old data, but give or take a bit, right? The two companies are of similar scale, right? Give or take a bit. Their strengths are in Europe, right? And to an extent in the U.S. Our strengths are in the eastern part of the world, so in the more growing markets the likes of India, China, et cetera, et cetera, right? There is a difference in the footprint of our portfolio versus Albéa. Broadly, I would say, the scale of the organization is similar or in a similar band. Okay. Okay. I remember in one of the earlier calls you mentioned that, you know, nearest competitor would be in terms of volumes will be half or some number like that. I'm not sure if that was Albéa or you were referring to some other company. No, I'm talking about Albéa only. I'm not going to compare volumes. Broadly I think their revenue is somewhat higher than us because their ASP is going to be a little higher because like I said, their spotlight is on the western world where ASP is going to be a little higher. Our spotlight is in the eastern world where ASP is going to be a little lower. I think broadly, we're a similar scale, but with strengths in different geographies. Sure, sure. Sir, my principle from ASP. Can you please join the queue back? Yeah, sure. Thank you. Thank you. Okay, thank you. The next question is from the line of Bhakti Thacker from Investec India. Please go ahead. Hi, thank you for taking my question. On raw materials front. Our COGS is up 7.5% and revenue growth is up 7%. In light of polymer prices in INR terms coming down by at least 10%, why are we seeing this 7.5% increase in RM cost? Basically it's on gross margin. I'll just hand it over to my colleagues to answer that question. See, I think you're comparing YOY, as far as raw material is concerned. If you see raw material has gone up to the Q2 of this year, and then it started softening. If you see the sequential number, you will see that it is down by almost around 80 to 90 basis points. Okay. Okay, you're saying that, to reflect on YOY terms, it will come in lag. sequentially if you see there is a softening on the prices which is visible in the numbers as far as RM is concerned. YOY basis also it is down, by about 10%. No, YOY basis on the, on the landed basis, landed cost basis, it is not down. If you see the polymer indexes and, if you convert that on a landed basis, it is not down 10%. Okay. Okay, I'll get back to you on that. One more other question is just to go back to one question that had been asked on oral care. Companies in India are reporting slower revenue growth and even talking about category weakness. In that sense, do we expect pressure in the coming quarters in AMESA? I mean, I think I've answered that question. See, the thing is we don't know what we don't know, and our customers are probably closer to what consumers are doing and what's happening to the category. From our standpoint, we have not seen any softening of overall volumes, right. As far as oral care is concerned or indeed our total volumes of NFR is concerned, right. We have not seen any softening thus far. Okay. I mean, I don't know what other people are saying, but I can tell you our order books are in cash. Got it. Yeah. Very useful. Just last question. Do you think for Americas, the margins will expand from here on? We have seen a good amount of expansion this quarter. That is absolutely our intent that will happen. In fact, there were some price increases that, you know, didn't come when it should have come in the previous quarter. They've all come now, right, so we should see the benefit of that. As far as Americas is concerned, soon it will start also benefiting from the Brazil investment that we made, right, and that is also expected to be accretive to the Americas region. Yeah, absolutely the intent is to see margin progression, right, in the Americas. Great. Thank you so much. Thank you. Thank you. The next question is from the line of Nikhil Upadhyay from SIMPL. Please go ahead. Hi. Good evening, and thanks for the opportunity. Two, three questions. One is, again, coming on the RM side. This quarter, there would still be some cost of the high cost inventory we would be holding. The sequential price drop would have, I believe, wouldn't have completely reflected in the gross margin. Would that be right? Yeah. Yeah. Amit will answer that. You're right. We hold certain amount of stock. Entire thing has not happened in Q3. It will happen going forward. The benefit of cost reduction will happen as going forward. In light of the price increases which we are talking of and along with the price reduction. If you look at historically and, it's not on a quarter, but over last 10 years, if you look at our gross margin operating profile, we were hiking around that 56%-57%. Do you believe that the combined effect of these two, we should come back to what we've already always been doing? Could it still take some time for us to reach there? You know, we've never given guidance on gross margin, and I'm not gonna do that today. Okay? However, you know, my response was on the earlier question. As far as total operating margin is concerned, right, we absolutely aim to get back to where we used to be, right, and we are taking step-by-step action to make progress towards the goal of getting back to where we used to be as a business. Okay? I've also indicated that today we have managed to do a margin progression and absolute EBITDA growth despite significant specific challenges in a couple of geographies. This is not going to continue, right? I think the time is not far away when, you know, we will not have those exceptional headwinds in some of those geographies. When you put all this together, softening to the extent that we've discussed. The regions that, you know, have had some kind of external challenge or the other coming back to a normative performance and our overall ambition, which is also bolstered by our cost-saving efforts, which are significant. When you put all this together, I would say our ambition on operating margin is exactly what I said. Is aim to get back to where it is with continuous improvement in margin recovery. A continuous effort towards margin recovery. That's the story. I don't want to get into a line by line ambition right on what is the right number. Sir, secondly, just a bookkeeping question. What we've seen across most of the export-oriented or a multi-geography company is that they're seeing a large foreign losses which company has reported because of the Euro depreciation and everything. Is there any foreign loss element for us in the European part of the business also or is this a normal operating loss only without any foreign loss? In the EUR there is not any major foreign exchange fluctuation because we have a clear-cut strict hedging policies in place every country wherever the hedging is possible. There are some countries where hedging is not allowed as a regulation. There we get hit, but otherwise if your question is on specific EUR, no, we do not have any a big amount to highlight that there is a loss on the foreign exchange. Last question, Kripalu sir. If we look at our performance over the last five years from 2018 to YTD, basically on America and Europe. At the run rate which we are in, America and Europe at close to somewhere INR 200 crore-INR 210 crore quarterly. Initially when we had reached that level, we were at a double-digit margins in America and high single or mid-single digit margins in Europe. Even today when the same level of sales is there, the margin profile is still way below than what we were. I'm not including the COVID period. I'm talking pre-COVID because COVID was a disruption in terms of high growth and everything. Considering the cost element in inflation and everything, for us one is do you believe that we can come back to those kind of margins which we were reporting pre-COVID in U.S. and Europe? Secondly, for that to be achieved is it a lot of higher volume which will growth which will drive us towards that or are there cost elements which we can reduce and probably achieve them? I think it's a great question. First and foremost we absolutely believe that both Europe and America as well can get to mid-teens margin or thereabout, huh? We absolutely believe that. To your point again half the story is volume and revenue growth, right? There are absolutely opportunities to optimize the cost base of those businesses as well, right? We are looking at all those opportunities which could include you know automated sorting whatever else right? Optimizing the factory cost, manual cost and so on and so forth, right? I think the ambition to get back to the zone of mid-teens margins for both the western geographies absolutely intact is there and yes I have to accept the fact that we've been shy of that. Okay? The ambition is there and I think it'll come through a combination of the two and you know it has become hard to read because unfortunately the headwinds have been just so dynamic and unpredictable that you know when you take two steps forward then one step back happens because of something that you couldn't have forecast or anticipated. We will absolutely be looking at all of these levers and vectors to make the business get back to that kind of margin zone. All I can't tell you is that whether it happen in one quarter or two quarters or one year or two years exactly, right? It won't be in the very distant long term, it will be in the more medium term, right, where we will absolutely aim to get back to those levels. Just one last question if you permit me. You mentioned in a previous question on acquisition that you would be looking at acquiring a facility in Europe. If we look at our own journey over the last 15 years, right. If we look at follow our annual reports and our journey specifically in Europe. Europe has never been a period to a very limited period when it's not been a pain point. Considering our own experience in operating in Europe and everything would you still like to go for an acquisition in Europe? I think that's a fair point. I suppose your question then is if you have an acquisition target that's margin and growth accretive, then do you have the management capability to manage it effectively, right? Effectively, that's what you're saying, that we are not able to manage a business in Europe because apart from, you know, a couple of years Europe has been some kind of a pain point in one form or the other. That's what you're saying. I think we have to believe that, you know we will do what it takes to make sure that if we put our money behind an acquisition that is strategic, right, then we will manage that to create value, right? Otherwise that will be a big failure and disappointment, right? I don't think we are gonna let that happen. I must also say that Europe had been through a lot of pain historically since we are going back many, many years, and that business was fixed, right? I mean, tough decisions needed to be taken, plants needed to be shut down, machinery needed to be moved. All of that was done to restructure the Europe business to get back to, a reasonable level of profitability, right? That was done in Europe, right? Then it came through a period where things were better and then, you know, the last two years were tougher, right? In the last two years it has been challenging. Please do recognize in the larger scheme of things, Europe still remains a relatively smaller part of our total business, right? Our intent is to make sure that we become a more meaningful player in Europe, and M&A is a possible route to leapfrogging scale, right? In Europe. Clearly, if we buy something and don't manage it well, then that is a management failure, right? You have to believe that we are putting that kind of money behind it, that we will also put the money behind managing it effectively, right? That's what I would say. I think the. I mean, there's nothing in Europe that says that it cannot be managed properly, no. Right? I think our own track record has shown that it was possible to do it, albeit, you know, a couple of years in the middle where we've had to take a step back in Europe for some reasons that I think is within our control, but many reasons that were outside our control. That's our philosophy, and I think we will evaluate any opportunities, you know, whether it's in Europe or anywhere else, based on our ability to manage it and then what's the management resource we need to put behind managing it effectively to create value. Yeah. Thanks a lot. Thank you. Thank you. Due to time constraints, that was the last question for today. I now hand the conference over to Mr. Pratik Tholiya from Systematix for closing comments. Thanks, Tanvi. On behalf of Systematix Institutional Equities, I would like to thank all the participants who have logged into this conference call. Thanks to the management for allowing to host the call and giving all the detailed answers to all the questions. I would like to hand it over to Mr. Anand Kripalu for any closing comments. No, I mean, really, you know, I just want to thank everyone who was on this call, first of all, who took time for this call, and more importantly, for having supported us through what has been a tough period in this business, certainly, over the last couple of years because of all the reasons we know. I just hope that, you know, step by step you are seeing us making, you know, progress towards not just recovery of this business, but actually taking this business forward. Thank you very much, everybody, for your faith and your time. Thank you so much. Thank you very much. Thanks. On behalf of Systematix Institutional Equities, I conclude this conference. Thank you for joining us, and you may now disconnect your lines.