Amira Nature Foods's (ANFI) CEO Karan Chanana on Q4 2014 Results - Earnings Call Transcript

Jun.17.14 | About: Amira Nature (ANFI)

Amira Nature Foods (NYSE:ANFI)

Q4 2014 Earnings Conference Call

June 17, 2014 08:30 AM ET

Executives

Katie Turner - IR

Karan Chanana - Chairman and CEO

Bruce Wacha - CFO

Analyst

Akshay Jagdale - KeyBanc Capital Markets

Kevin Grundy - Jefferies & Company

Operator

Greetings and welcome to the Amira Nature Foods Fourth Quarter Fiscal Year 2014 Earnings Call. At this time, all participants are in listen-only mode. A question-and-answer session will follow the formal presentation. (Operator Instructions). As a reminder, this conference is being recorded.

I will now like to turn the conference over to your host, Katie Turner. Please go ahead.

Katie Turner

Good morning everyone, and welcome to Amira Nature Foods fourth quarter and fiscal year 2014 earnings conference call. Speaking on the call today are Karan Chanana, Amira’s Chairman and Chief Executive Officer; and Bruce Wacha, Chief Financial Officer; Ashish Poddar, Executive Director of Finance; and Rajesh Arora, Senior Executive Director of Finance are also on today’s call.

By now everyone should have access to the earnings release which went out yesterday at approximately 4:00 PM Eastern Time. The earnings press release and earnings presentation slides are available on the Investor Relations portion of the Company’s website at www.amira.net. This call is being webcast and a replay will also be available on Amira’s website.

Before I begin, we’d like to remind everyone that prepared remarks contain forward-looking statements, and management may make additional forward-looking statements in response to your questions. Such statements involve a number of known and unknown risks and uncertainties, many of which are outside the Company’s control that could cause its future results, performance or achievements to differ significantly the results, performance or achievements expressed or implied by such forward-looking statements. Important factors that could cause or contribute to such differences include risks detailed in the Company’s public filings with the Securities and Exchange Commission and those mentioned in the earnings release. Except as required by law, the Company undertakes no obligation to update any forward-looking or other statements herein, whether as a result of new information, future events, or otherwise.

Also in the Company’s earnings release and in today’s prepared remarks, the Company includes adjusted EBITDA, adjusted profit after tax and adjusted earnings per share; these are non-IFRS financial measures. A reconciliation of non-IFRS measures to the most directly comparable IFRS financial measures is included in the Company’s press release which was issued yesterday.

And with that, I would like to turn the call over to Karan Chanana, Chairman and CEO.

Karan Chanana

Thanks, Katie. Good morning everybody, and thank you for joining us on today’s call. I will provide a brief overview of our financial highlights, review some of our recent business highlights and provide you with an update of our strategic growth initiative. Then Bruce will review the financial results for the quarter and the full year in more detail and provide guidance for fiscal 2015. After that, we will open up the call for your questions.

We are really pleased with our performance in the fourth quarter and the full-year 2014, where we grew sales significantly, improved our operating margins and nearly doubled income. We have continued to make significant investment for our continued future growth. We are focused on our dramatic increase in the class of our consumers, in our home market, while also exploiting new and existing opportunities around the world to further grow our business. To bolster our growth in India we added seven company owned outlets or DCs as we like to call them, distribution centers from the time of the IPO till the end of fiscal 2014. This takes the total number of company owned distribution centers in India alone to eight. We plan to add another seven distribution centers over the next year bringing the total to 15 DCs in India by fiscal ‘15. This will further support and grow our success in India.

Internationally we have made key investments in core regions, including our acquisition of Basmati Rice GmbH Germany, which added to our position, not only in Germany but throughout Continental Europe. We continue to invest in the UK, increase our marketing spend and build our presence in more than 3,000 distribution points there. And now interestingly in the U.S., where we nearly doubled our revenues all Amira branded, in the last one year; yes, nearly doubled revenues of Amira brand in the last one year in the U.S. alone. And tell you what, we believe we are going to do it again this year, double it again, only in the U.S.

Now focusing on our results a little more in detail, our full fiscal 2014, where we generated revenue of $547.3 million, an increase of over 32% compared to last year, reflecting higher sales both in India and across the globe internationally. Our strong sales performance for the year exceeded our annual guidance and underscores our ability to consistently add important new customers, grow our business with existing customers and continue to enter new geographic markets. We are also benefiting from our expanded product portfolio including snacks, ready-to-eat products, and of course strong sales are testament to our delicious premium flavorful product offerings further strengthening our leadership in the industry. All this is supported by a growing and committed management team. We continue to hire across the world and our focus is going to be in the U.S. in the coming six months.

We are also pleased to report an EBITDA of $75.5 million, which is an increase of 44% compared to last year, which also exceeded our annual guidance. Our EBITDA margins improved more than a 100 basis points to 13.8% on a year-over-year basis. These improvements highlight our ability to leverage our operating cost across higher sales volume and the pricing power of our sector and the Amira brand. This leads us to continually benefit from the growing economies of scale as a brand and as a company.

As we begin fiscal 2015, we remain very well positioned to deliver another record year. As a matter of fact, the foundations of which were already laid out with our inventory in Q3, our purchases and our investment in our growth through the inventory. Global demand for our products and the Amira brand remains very strong and continues to grow. Rice is a gluten-free food and basmati rice from Amira sits right on top of that pyramid.

We anticipate that we will continue to benefit from a greater number of consumers across the global becoming increasingly concerned and moderating their gluten intake and concern for general health and awareness. It’s also worth noting that our products are GMO free. They all are natural and/or organic which is also becoming more and more important to customers, not just in the developed world but across the globe.

Along these lines as most of you are aware, we launched the organic food line in fiscal 2014 and we’re now able to capitalize on the growing demand for organic products. In short, the Amira brand product offerings are very much on trend with consumer demand and we look forward to continuing to grow while cementing our position as a leading global packaged foods company.

In this fiscal which is fiscal 2015, we plan to remain focused on growth in India and as well as international. Opportunities are tremendous in both areas, international and India. At the end of the fourth quarter in fiscal 2014, we announced the distribution of Amira branded products in Reliance Retail and Heritage Retail stores. Heritage Retail has a unique chain of 68 retail stores promoted Heritage Foods with a strong presence in Southern India, whereas Reliance Retail is a nationwide behemoth with over 650 retail stores. The Amira brand continues to make strong strides with consumers and this is just a small example of that.

Now in India, we benefited from the addition like I mentioned earlier of seven new DCs and just to remind you, four out of the total of eight which we have now of the DCs, came to us just in the quarter four, laying the foundation for growth of the India business in fiscal ‘15 in which we sit now.

As we previously have stated and some of you have seen who visited India, Amira is successful both in traditional mom-and-pop and western style model retail locations and we have significant opportunities to capitalize this growth in each category. Our new distribution centers opened in a mix of both major cities and towns including Hyderabad, Bangalore, Kolkata, Ahmadabad, Gurgaon, Delhi, Zirakpur in the state of Punjab, and Surajpur in the State of Uttar Pradesh.

One of our key ongoing strategic initiatives is to strengthen our distribution footprint in India and we look to further benefit from India’s growing middle-class demand for branded specialty rice and the recent election of a majority government giving a key heads up to industrial growth, clear policy initiatives, growth in demand led by more job creation, all of which is a direct benefit to the market economy thereby benefiting the Amira brand in India. As demand for our product grows, we also remain focused on ensuring that we have the ability to capitalize on the ongoing robust business opportunity. We have recently announced that we give a contract to Buhler, which is a Swiss-German company for $8.3 million for supplier plant and machinery for our new facility, where we add 48 metric tons an hour of paddy processing capacity in the state of Haryana, India, which grows the largest volume of basmati rice in India. We remain on track to complete the facility and for it to be operational by end of fiscal 2015. We’re excited to expand this relationship with Buhler as Amira has yet again placed the largest order they’ve received on a single year from a company in India. May I remind you that, we at Amira, were also the first company to set up a fully automated rice plant from Buhler way back in 1995.

The new facility will more than double our capacity, and like I said, this will enable us to do a few things; bring in some of the margin, we currently leave on the table; and two tails for this capacity expansion already exist. So this will support our continued growth as we move towards our long-term target to be a leading global package foods brand.

Over the last few months we’ve attended, as we always do, a number of leading global food stores and met with many food sellers, food retailers, restaurant buyers and consumers all around the world. Last month was particularly exciting. We attended the National Restaurant Association show, which was held in Chicago. Our booth was busy throughout this event. And when I got there I saw a big crowd, I’ll tell you why. We are particularly excited that the celebrity chef, Ming Tsai, joined us for live cooking demonstration. Ming Tsai is an experienced chef and restaurateur and his decision to select Amira as his preferred choice of basmati rice is a testament of the taste, flavor superior quality of the Amira branded products, but also the ability of the Amira management and the team to execute, implement the vision across the world including the United States.

In addition to this, we also attended National Expo West in Anaheim, California in March. This was our first time at that event and we’re excited that we shared our full line of products alongside many of the well-recognized brands in the natural and organic space. So, like I said before, expanding our geographic diversity is one of our key growth initiatives. We recently announced that we launched the Amira brand in Tesco supermarkets in the United Kingdom and you know this is a great big win for team Amira in UK. Tony, our CEO in the UK, has done a great job. Now we are in two of the largest four supermarkets in the U.K. Tesco being the largest, so it is a big win and you should be looking forward to more of such from our side Amira. We first entered the UK last year in June with Morrisons added more stores and even in Michelin-starred restaurant to our portfolio.

And now Tesco, Tesco is a leading retailer in the UK and this is not just an important step in expanding our business but it’s a significant step because this enables us to say, yes, Amira is in the UK. As our business grows, we believe it is important to help give back to the global community. This is particularly important and has been in our DNA, not only at Amira but to us as a family across generations.

We recently announced that we partnered with Family Reach to sponsor the non-profit Cooking Live event series. The first series we sponsored raised $200,000. And I’ll tell you what Family Reach does. Family Reach provided immediate and direct financial assistance for families fighting cancer throughout the United States. Amira sponsored Family Reach’s premier fundraising event Cooking Live, a unique and interactive experience where some of the top culinary talent work together to prepare a five-course meal. Participating chefs who are paired with young cancer patients those who are granting recipients of Family Reach. We at Amira are thrilled at the success of this event and are proud to be able to help in our small little way. We look forward to continuing the relationship with Family Reach, thus working towards a happier and healthier planning.

This is indeed an exciting time for Amira. We are well positioned to build-off the positive momentum of our strong fiscal 2014 and deliver yet another great year. Our focus remains on expanding our business, both in India and across the globe internationally, adding new retail partners, while increasing our business with our existing customers, which incidentally includes some of the world’s largest retailers and our continued product packaging innovation, brand offering are enhancing our ability to do that, this coupled with the supply chain efficiencies of the new plant coming online.

And how are we doing all that? We are doing all that by building a great team which has a track record of success. We’ve had some great teammates join us across the world, and we encourage you to meet us at some of the shows we attend or come and visit us in any of the geographies where we have our offices and come and meet our team. This will enable you to share our confidence, enthusiasm as we all together build Amira.

Now I would like to introduce Bruce Wacha, our new CFO. As many of you are aware Bruce joined us at the beginning of this month. Bruce brings extensive experience in corporate finance, M&A, planning, analysis and in the capital markets. He previously served as a Director in Deutsche Bank's Global Consumer Group advising corporate clients across the food and beverage and consumer product landscape. And that’s where we met him, and we were fortunate to have him work with Amira on our IPO.

Now in addition to his role as CFO, Bruce will also help us establish a U.S. corporate and sales office in New York City where he will be based. We’re very excited to have Bruce on board and look forward to his contributions as we continue to execute on our strategic growth initiatives across the world and especially in the U.S. like I said. It nearly doubled the Amira branded revenue over last year and we believe we’re going to do it again this year.

With that I’m going to turn call over to Bruce. Go ahead.

Bruce Wacha

Thank you Karan, and thank you for the generous introduction. I would like to begin by saying that it truly is a pleasure after spending years with the company as an advisor to join in my current full time capacity.

Now getting to the numbers. As Karan said, our reported numbers are strong, with record revenue, adjusted EBITDA and EPS on both the quarterly and annual basis, while also increasing our margins. The financial statements illustrate the investment that we are making into the business as well as the strength of our earnings power and balance sheet.

I will now walk you through the quarter and the full year while referencing the investor presentation Katie noted previously.

First the fourth quarter; revenue increased during the quarter by $46 million or 33% to $186.6 million, driven by increased pricing and volume gains both in India and internationally. Our international sales increased by more than 40 million or 57% to 114 million, while India sales increased by more than 10% after adjusting for the impact of FX. Our Amira branded and third party sales grew by nearly $20 million to $158.3 million while our institutional sales grew by $26.6 million a big sign of the strength to our balanced revenue model.

Our adjusted EBITDA was $26.4 million, an increase of $8.2 million more than 45% with margins increasing by more than 100 basis points, driven by pricing, efficiencies of scale and improvements in the cost of materials which follows the percent of sales when compared to the prior period. Our adjusted profit after tax increased by nearly 100% to $16.8 million for the period, as did our EPS which grew to $0.47 per share up from $0.24 in the year ago period.

Now I’d like to move to the full year; our revenue increased by more than $130 million during the period to nearly $550 million. This was driven by our international sales which grew by nearly $100 million or 43.8% while our India sales increased by $35 million or nearly 20%. We experienced double-digit growth across the portfolio, with our Amira branded sales increasing by $43.8 million or 22.4% to $238.8 million. Our third party branded sales increased by $24 million or 11.3% to $239 million, while our institutional sales increased by $65.6 million.

Our adjusted EBITDA increased by $23.1 million to $75.5 million up from $52 million a year ago. We benefited from strong sales growth for the period as well as increased pricing power and operating efficiencies. This drove margins up by more than 100 basis points. Our adjusted profit after tax for the period nearly doubled to $41 million, while our EPS also increased by nearly 100% to $1.14 per share. As Karan mentioned, we are building our business globally and as we grow the business into new geographies and customers, we continue to diversify. I would like to walk you through a little bit more detail about our revenue by geographies, brand and customers.

Looking at geography first. Our sales in India $224 million, up 18.6% year-over-year, EMEA was $237.5 million, up 22.9%, Asia Pacific and North America nearly doubled to $73.9 million and $11.8 million respectively.

On a brand basis, we continue to have a balanced portfolio. Institutional was approximately 13% while both our Amira branded and third-party branded comprised approximately 44% of the business.

Looking at revenue by customer, the top five customers today comprised of 35% of total sales, that’s an improvement from the time of IPO when the top five customers comprised of nearly 50% of our sales.

Now I'd like to move on to the balance sheet. Cash and equivalents for 2014 were $36.6 million compared to $33.3 million a year ago while total debt was $184 million compared to $161 million a year ago. As we noted previously, adjusted EBITDA was $75.5 million, up from $52.4 million. This shows the strength of the business and our balance sheet. The total debt to adjusted EBITDA, 2.4 times compared to 3.1 times a year ago and net debt to adjusted EBITDA of two times compared to 2.4 times a year ago. This is why we are investing in our business and continuing to grow. I'd like to remind folks of the progress that the company has made since the time of the IPO when sales were 342 million, adjusted EBITDA was 42 million and adjusted EPS per share was $0.38, till today with sales of nearly $550 million, adjusted EBITDA more than $75 million and adjusted EPS of $1.14 per share.

Now moving to our forward guidance. For fiscal 2015, we expect more than 20% growth for both revenue and adjusted EBITDA and we continue to maintain our long-term guidance of $1 billion in sales and $150 million in adjusted EBITDA.

And with that I would like to turn it over to questions from the audience.

Question-and-Answer Session

Operator

Thank you. We'll now be conducting a question-and-answer session. (Operator Instructions). Our first question today is coming from Akshay Jagdale from KeyBanc Capital Markets. Please proceed with your question.

Akshay Jagdale - KeyBanc Capital Markets

Good morning.

Karan Chanana

Good morning.

Akshay Jagdale - KeyBanc Capital Markets

And welcome Bruce. So, my first question is actually for Bruce. First of all thank you for the presentation, it’s helpful but more formally can you just talk a little bit about your decision to come over to Amira; I mean what were the main factors that drove you to make that choice?

Bruce Wacha

Sure Akshay, great question. First off, I've known Karan for a few years dating back to before the IPO, tremendous amount of respect for him and what he has been able to do with the company, working as a banker and covering companies in the consumer space. There are very few companies out there that have been able to grow at greater than 20%, top-line EBITDA and EPS. And I thought it was a really exciting opportunity and I couldn't be more excited and happy to be on board. So thank you.

Akshay Jagdale - KeyBanc Capital Markets

And just one question on the quarter as well as the year I guess on the institutional business; can you talk about what, there is a big doubt obviously this quarter and for the year, what exactly did we sell to and it seems like it went to the Asian customers. Can you just talk about what you sold there and why, just talk about strategically how that fits in right, so it’s hard for us as analysts to model that, but how do you think of that business strategically and who specifically did we sell to and what products were sold?

Bruce Wacha

Sure. Let me start off answering that and maybe Karan could finish off, but I think the way we’ve always described the institutional business is it should consist of about somewhere between 5%, 12%, 13% of sales. We pursue that business when it's profitable, meeting either at margin or margin enhancing compared to the rest of the business. We're not giving out information specifics on the actual customers, but it's typically products that are brought from a lot of the same farmers that are providing us rice. And we look to have good relationships both on the sourcing as well as customers that we’re consulting. So, hopefully that answers your question.

Akshay Jagdale – KeyBanc Capital Markets

Yes. And just looking at next year, so the guidance, I am pleased by the guidance. But just trying to get a little bit more color, wherever possible, so first on growth. You’ve maintained sort of your historical way of giving out guidance at 20% growth, which is very solid. But when I just look at next year’s guidance compared to this year and the fundamentals, it’s my opinion that there seems to be signs that there could be an acceleration in demand. So, one, can you give us some color sort of by product group maybe institutional versus retail and international versus India, just some color on relative to that 20% growth that you’re guiding for the overall company where each of those might bend? And perhaps you could talk a little bit about the first quarter, it seems like it’s a tough comparison or the toughest comparison from a revenue perspective. Is there anything we need to be thinking of when we’re modeling the first quarter of fiscal ‘15 as far as growth goes?

Karan Chanana

Akshay, the way to look at it is clear. We’ve been always conservative with our guidance. We continue to do that. We’re a young public company, and you’ve seen that our guidance has been consistently conservative. Now talking to your institutional piece and to give you how do you want to model it out. I would model it out, like we’ve guided to more than 20% and on the institutional piece like group side, 5% to 12% if you take a three-year running average comes to just over 7%, that could be a way to model it out as well. And so, on the current year quarter, we’re still in the quarter, it’s not over so we can’t really talk about that. What all I can say is we guide conservatively and we perform better that the way the business has always been and that’s how we would like to guide.

Akshay Jagdale – KeyBanc Capital Markets

Okay. And just about margins, obviously, you’ve got the inventory, the crops' been harvested. You have basically the inventory that you age. Is the gross margin performance this quarter somewhat indicative of what will happen in the first three quarters of the year? I mean, I am not saying that you’re going to have a 400 basis point gross margin expense over the next three quarters. But what it seems to me, what I’m seeing is your revenue, your pricing has been ahead of whatever your cost of goods are, even taking into account the new crop, which you have to pay a lot more for. So, margin seems to be trending just like they have over the last couple of years, and I think that should continue at least the first three quarters of the year until you get the new crop, correct? Is that generally directionally a good way to think about gross margins?

Karan Chanana

Akshay, like I said, the sector has a lot pricing power. Even on the last call I said we’ve increased prices slightly ahead of what our costs has been, you’ve seen that in our numbers. We’re getting more Amira branded. If you look at it from the time of the IPO to now, we’ve in dollar terms, doubled the Amira branded sales. So it is us. And as we enter more developed markets, we get mature as a brand along. The way to look at our business is not quarter-to-quarter but to look at in a more longer-term basis and I can certainly guide you to that. And talking about the current or the going quarter, from this fiscal, I can’t really say very much because we’ve just started the year. And I think we’ll have to wait for our first quarter conference call to give you the numbers on there.

Akshay Jagdale – KeyBanc Capital Markets

And just on what investments you’re making for growth, other than the CapEx, which we’d love to get some clarity on. What the CapEx will be in fiscal ‘15? That’s question one. And the other one is, personnel and other expenses, obviously, it seems like you’re going to be hiring or are hiring a lot more people than you even hired this year. You’re guiding 20% more growth. How should we think of that personnel and other expense line, which has been growing at roughly 100 basis points year-over-year over the last couple of years. So is that a good -- will that continue to increase? And then what’s the CapEx number for next year?

Thanks, and I’ll pass it on.

Karan Chanana

Okay, on the personnel, we’re building a new plant so obviously there will be more personnel hired. We’re getting into new geographies, expanding into current countries we’re into. So, obviously -- that definitely leads to expanding the team. We’re very excited. We have some great people who've come onboard. And this is a great testimony of being a public company, and that too successfully. So, yes, we have not guided to what number the personnel will be in terms of basis points. I will let Bruce answer that maybe after the first quarter. And on the CapEx, I think that’s yet another number you could get from us post the first quarter this year unless of course Bruce you have anything to add there?

Bruce Wacha

Yes. I mean, the only thing I'd add on the CapEx side is, the company has clearly articulated since the time of the IPO what they thought spending would be on the facility. As Karan said, we’d love to have that completed by the end of the fiscal year. And so I would imagine roughly that amount that we’ve guided towards would be CapEx for the year.

As far as the personnel, we added a fair number of people, we'll disclose that in the 20-F. A lot of those people were in India and I think that we’re doing a good job keeping a handle on the cost associated with it.

And obviously on the frontend we’re adding people on various jurisdictions in developed markets and emerging markets as well. I think maybe it’s a good time also for Karan to talk about some of the pillars of growth that we have, that are going to continue to drive the business whether it’s U.S., UK, Continental Europe as well as the Middle East, both the branded and third-party business there in India I think a lot of great things to come.

Karan Chanana

Yes. Okay. Thanks, Bruce. Okay, now on the growth side of it, I think we’re growing everywhere. As we’ve added management teams everywhere, growth is coming from all over as a matter of fact it’s actually what we call low-hanging fruit. Running the business and growing it seems to be the easy part of this whole thing. We added four DCs in the last quarter of the financial year. We hired more sales personnel. We continue to do that, so India looks very strong. The new government in place, euphoria is already there. You’ve seen the Indian stock market, consumption sector rise, big UK, Europe we’ve gone into Tesco, we’re expanding in there, we're adding more SKUs into Tesco alone in August. In September, October we'll be getting into other major supermarket chains in the UK that’s by cementing our presence.

And frankly we'll be able to do what some other brands have taken many years to do in, 24 months. That just is a testimony of how successful we are at executing our laid out plan then we have the acquisition of Basmati Rice GmbH that’s rolling out and we aim to substantially increase the top and bottom line of Basmati Rice GmbH in this financial year. And we’re expanding into Continental Europe as well. Take to the Middle East, we’ve added distributors and we will add even more this year and in countries as well, so strong growth coming out there. And then the U.S. like I just said, we nearly doubled revenues and yes, this financial year we aim to double revenues again from the last financial. So, we were nearly $12 million in sales of the Amira brand in the U.S. closing 31 March '14. For 31 March '15, we aim to double that and we're well on our track to doing the same.

We’re establishing our office in New York City where Bruce will head that out and we’ll be hiring a full team to bring the product to closer to the investors more in the North and Northeast. That all is low-hanging fruit, so there is a low-hanging opportunity all over and I am not going to go more into that for a very strategic obvious reason, don’t want the competitors to hear exactly what we are doing where. But you'll be able to see more Amira branded products across the shelf, across the world as well, so yes.

Akshay Jagdale - KeyBanc Capital Markets

Okay. I’ll pass that on. Thank you.

Bruce Wacha

Thank you.

Karan Chanana

Thanks.

Operator

Thank you. Our next question today is coming from Kevin Grundy from Jefferies. Please proceed with your question.

Kevin Grundy - Jefferies & Company

Hey, good morning guys.

Karan Chanana

Good morning.

Kevin Grundy - Jefferies & Company

I just wanted to come back to the institutional business quickly because it was such a big contributor in the quarter. So just to be clear, the expectation and what you guys have baked into guidance, I guess let me take a step back. Number one, fair to say that came in above your own internal expectations both on the quarter and for the year, is that fair?

Karan Chanana

We always guide conservatively so it’s in line with how we guide and run the company.

Kevin Grundy - Jefferies & Company

Okay. I guess just to be clear though, I thought the expectation was that it returns back to mid-single digits as a percent of growth and I guess for the year it came in 13%, is that right?

Bruce Wacha

Yes. But we’re not talking -- I think you’re mixing up growth and percent of the pie.

Kevin Grundy - Jefferies & Company

Okay. Well either I guess institutional drove what, like 46% or so of your growth this year, that would not be with the expectation going forward I would not think, correct?

Karan Chanana

Okay, here is the way to look at it or model out the institutional part of it. If you take a three year average it comes to 7%. So at the time of the IPO, it was 8%, went down to 2%, came up to nearly 13%. So, we’ve always said it’s an opportunistic but very profitable business. We buy from the same farmers who supply paddy to us and it's to the same customers who buy rice from us. So, we only do the business when it is value accretive both at top and bottom line to us. So it’s not margin dilutive at all, it’s same or better and it also adds to our procurement which is a very strong point for Amira and we have seen other people struggle with the procurement whereas it’s a clear advantage for us. And we’ve been transparent and always said the way it is.

Bruce Wacha

Yes and I guess the only thing I would add to that is, it’s fair to say it’s opportunistic business, I don’t think it’s fair to say it’s low quality or low margin. It’s good business.

Kevin Grundy - Jefferies & Company

Okay. And then I don’t know if you guys have done this exercise but I guess the gross margins are up like north of 400 basis points year-over-year. Can you do the walk for that, I mean get us there from the price cost gap maybe some modest operating leverage you might have gotten from the business. I guess you guys are saying the institutional business is margin neutral for you guys, it doesn’t -- based on what you’re telling us it doesn’t appear to be a drag. Can you guys do that walk?

Bruce Wacha

That’s not something that we’re going to share at this point in time.

Kevin Grundy - Jefferies & Company

Okay. But you do not -- and I guess going back to the earlier question, you guys are not guiding either I guess from a gross margin perspective for the year because I guess that we should not suspect that you will sustain the 26% gross margin?

Bruce Wacha

Yes, we’re not guiding towards margin on the gross side.

Kevin Grundy - Jefferies & Company

Okay. How big a contributor -- changing gears, how big a contributor was the German business both for the quarter and then what should we expect kind of going forward from a top line and profitability perspective?

Karan Chanana

The German business is strong, I think it’s little over 2% of our total revenue and although it’ll be high growth, but it’s still a small business in terms of our total revenue and top and bottom line both. The opportunity there is low hanging again because it gives us penetration into the German market. The German market is not a very evolved market as you know yourself that a lot of it is private label for the supermarket providing a world class quality brand and there is giving the opportunity to the consumer to move to a higher quality product which has pricing power. So we are excited about our growth there. In addition to that, Germany is also the largest organic consumption market in Continental Europe, so opportunities all along that side.

Bruce Wacha

Just to add to that, we bought the business with approximately $9 million in sales and the way it flows into the financials is really just that fourth quarter. You can imagine what the sales were and what the impact was in the fourth quarter. But the full year revenue numbers we’re not doing any pro forma or acquisition number, it's real revenue for the business, how we looked at it.

Kevin Grundy - Jefferies & Company

Got it, okay. And then just a couple more from me. The debt refinance, can you guys give us an update on that and I apologize if I missed it.

Bruce Wacha

No, look that was only the big focus of mine as a banker and advisor, obviously it’s something we have a mind towards and I’ve focused on as part of the company now. I don’t want to guide towards a specific date but there’s multiple opportunities and ways that we can bring a lower cost of capital to the business. I think that’s something that we’ll be pursuing in the near and medium term. The one thing that I would keep in mind that when we think about our debt is the company is not -- there is no financial wall of maturities that we’re facing, we have good relationships with our consortium of lenders in India and we continue to do so. So they’ve been supporting the business for decades, lot of the same banks and we’ll be happy to continue to do so. So this is a cost of capital issue, not a financing or [indiscernible] the capital issue.

Kevin Grundy - Jefferies & Company

Bruce can you help us better understand and Karan for that matter, I guess why you guys would not or have not acted on it, I guess given this has been sort of much talked about for several quarters I guess maybe and understanding your cost of capital argument and so forth. But help us better understand why it hasn’t happened and why it would not happen in the near term?

Bruce Wacha

Sure, if you’re asking for a historical look back, the company has some different strategic alternatives; it was considering during the year and as a result didn’t want to be out there with a big financing while they were doing that. Obviously the change in orders we wanted to wait until that was completed before we did anything. So clearly nothing’s going to happen until we file our 20-F, which should be coming in the next coming weeks, but it’s something that we could look to do in the near to medium term.

Kevin Grundy - Jefferies & Company

Okay. Just a couple more from me and then I’ll hand it off. But upcoming financing, I guess for you guys with respect to the facility. How do you guys plan on financing that between cash on the balance sheet, your facility and cash flow from operations and how should we think about modeling this, both for the full year and quarterly?

Bruce Wacha

Sure, I think that’s pretty consistent with the story that we’ve told from IPO, we’re sitting on a fair amount of cash on the balance sheet, which should satisfy a pretty significant portion of our CapEx needs.

Karan Chanana

And the balance will be in AVL from the existing consortium of lenders as the asset (sits) [ph] in India.

Kevin Grundy - Jefferies & Company

Okay and just one last one from me. Then with respect to the guidance, the 20% plus in sales and EBITDA, I guess is kind of broad. Can you better frame that for us other than what you guys have put out there and what should we expect from margin improvement perspective? What are you going to get from operating leverage maybe seems like you guys are pricing ahead of your input costs, so you should get some margin expansion there as well. Can you help us better think about that and that’s it from me. Thank you.

Karan Chanana

I think Kevin we’ve always guided to revenue and EBITDA and we’ve been conservative. So I think we’ll maintain what we’ve guided to at more than a 20% increase in revenue and EBITDA.

Kevin Grundy - Jefferies & Company

Okay, thank you.

Karan Chanana

Thank you.

Operator

Thank you. There are no further questions in the queue at this time. I’d like to turn the floor back over to management for any further or closing comments.

Karan Chanana

I’d like to thank everybody for dialing in and for your interest in ANFI. We remain excited to grow and interact and meet a lot of you as the year goes on. We will be attending a lot of the conferences and for those of you in the New York area, we’re participating in the Fancy Food Show coming up starting on the Sunday the 29th, we have a nice big booth there and the details are on our website and we look forward to seeing you there. Thank you, have a nice day.

Operator

Thank you. That does conclude today’s teleconference. You may disconnect your lines at this time and have a wonderful day. We thank you for your participation today.

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