Chennai 27th October 2010: The Board of Directors of Carborundum Universal met today and have approved the results for the quarter ended 30th September 2010.
Consolidated Q2 financial performance
Consolidated Net Sales grew by 26% to Rs.408 Crores from Rs.325 Crores. All business segments i.e. abrasives, ceramics and electro minerals registered growth rates of around 25% or more. More than 50% of of Company’s consolidated sales continues to accrue from exports & overseas operations.
EBITDA grew by 32% from Rs.64 crores to Rs.85 crores. PBIT grew by 36% from Rs.53 Crores to Rs.72 Crores.
Profit before tax was Rs.66 Crores – an increase of 46% over the previous year figure of Rs.45 Crores. Consequently profit after tax grew by 55% to Rs.41 Crores over the previous year figure of Rs.26 Crores.
Consolidated H1 Financial Performance
Consolidated Net Sales during the first half of 2010-11 stood at Rs.760 Crores posting a growth of 26% over H1 of previous year. Profits after tax (including exceptional income) were at Rs.84.6 Crores as against previous year of Rs.45.7 Crores.
Consolidated Operating Performance
CUMI’s consolidated abrasives sales registered an increase of 25% for the quarter. Sales for the quarter was Rs.180 Crores (Rs.144 Crores for the corresponding period of last year). This growth was made possible by the strong off take from various market segments in India and Russia.
CUMI Standalone abrasives registered a growth of 24% in sales. Off take was strong particularly in the direct customer segment. Marketing initiatives were focused on generating sales from the more profitable segments of the market. Bonded abrasives witnessed stronger sales growth than the coated segment, where competition continues to be intense. Competition was stiff both from local and international players. Market share was sought to be retained through product differentiation and leveraging application engineering skills.
Sterling Abrasives, which caters to certain select segments of the bonded abrasives market registered a 30% growth in sales. Wendt India, the joint venture with Wendt Gmbh, which addresses the super abrasives market, registered a 47% growth in sales.
In Russia, sales at Roubles 136 Million (previous year Roubles 79 million), constituted a 72% growth. Growth was driven by improved off-take from auto, auto component and steel markets.
The Chinese operations primarily continued to focus on servicing the requirements of thin wheels and other abrasives of the Indian and Russian operations and a few customers in Europe and Middle East. The operations have been stabilizing and performance will further strengthen in the oncoming quarters.
Sales of abrasives to the North American markets, through CUMI America and CUMI Canada witnessed a growth of over 50%, with improved off take from various customer segments.
The overall profitability margins of the abrasives business improved to 13.6%. Indian operations witnessed an improvement, as a result of the initiatives taken to improve raw material consumption efficiencies, optimizing raw material sourcing and improvement in power and fuel consumption efficiencies.
Profit before interest and tax in absolute terms, increased by50% i.e. from Rs.16.4 Crores to Rs.24.53 Crores.
The second largest business segment viz. electro minerals continued its strong performance with an increase of 27% in Net sales (Rs.153 Crores vs. Rs.120 Crores).
Silicon carbide sales of Volzhsky Abrasive Works, Russia, recorded a jump of 31%. Demand pull, particularly from overseas customers, was strong which helped the business to achieve the growth in sales. The business was able to pass on the steep increase in input costs (Power & Pet Coke) through price increases to customers.
The electro minerals business of the Company in India did well registering a growth of 29%. All three major product groups viz. silicon carbide, brown fused alumina, white fused alumina did well recording higher sales. The market for fused minerals continues to be positive with all user industries doing well. Price realization is showing an increasing trend. The photovoltaic segment of the market also registered good off-take, with global installed capacity of solar power using photovoltaic technology witnessing an increase. In the domestic market, off take from all user industries viz. abrasives, refractories and engineering was strong.
In South Africa, Foskor Zirconia Pty Ltd., which is on a comeback trail, consolidated its first quarter performance with a 65% growth in sales in the second quarter. With strong revival in the global steel and minerals markets, demand pull witnessed an increase from all major customers. Profitability of the business continues to be under pressure given the steep appreciation of the South African currency and increase in input costs. Given the positive market sentiment, the business has commenced work on increasing price realizations to off set cost increases and restore operating margins.
Profit before interest and tax of the electro minerals business, increased by 34% i.e. from Rs.27 Crores to Rs.36 Crores. The increase in input costs which was witnessed in the first quarter continued to impact the businesses in India, Russia and South Africa in the second quarter also. However the business improved its overall profitability by leveraging the benefit of increased sales coupled with tight control on fixed costs.
The ceramics business recorded a 27% increase in sales (Rs.86 Crores vs. Rs.68 Crores).
Both the high alumina ceramics business and the super refractories businesses performed well during the quarter.
Sales of metalized cylinders continued to grow at a brisk pace with important new customers being added during the quarter. Balancing equipment has been commissioned during the quarter which has helped to increase the manufacturing capacity for metallised cylinders. Exports of wear resistant tiles continued to do well, with strong off take from North America and South Africa. In Australia, CUMI Australia registered lower sales during the quarter due to intense Chinese Competition in select markets Stiff competition, particularly on price has been witnessed in recent times.
The Sales of Super Refractories increased by 39% compared to the same period last year, driven by the strong off take for fired and monolithic super refractories. Off take from Carbon Black, Cement and Steel industries was strong. Anticorrosives recorded lower sales due to lower project orders.
The Company’s joint ventures, in the refractory business, viz. Murugappa Morgan Thermal Ceramics Ltd. and Ciria India Limited registered a 47% growth in turnover.
Profit before interest and tax of the Ceramics business segment, increased by 17% i.e. from Rs.12.7 Crores to Rs.14.9 Crores.
With a view to rationalizing the holding structure, the investments in CUMI America Inc and CUMI Middle East FZE have been transferred from Carborundum Universal Ltd, India to CUMI International Ltd, Cyprus.
With the mood in the domestic economy being positive and the global market segments catered to by the Company’s various businesses gathering momentum, the growth trends of the first half of the year is expected to continue during the 3rd quarter.
About Murugappa Group
Founded in 1900, the Rs.13617 Crores (USD 3.03 billion) Murugappa Group is one of India’s leading business conglomerates. The Group has 29 businesses including seven listed companies actively traded in NSE & BSE. Headquartered in Chennai, the major companies of the Group include Carborundum Universal Ltd., Cholamandalam Investment and Finance Company Ltd., Cholamandalam MS General Insurance Company Ltd, Coromandel International Ltd, Coromandel Engineering Company Ltd, EID Parry (India) Ltd, Parry Agro Industries Ltd, Tube Investments of India Ltd and Wendt (India) Ltd.
Market leaders in served segments including Abrasives, Auto Components, Cycles, Sugar, Farm Inputs, Fertilizers, Plantations, Construction, Bio-products and Nutraceuticals, the Group has forged strong joint venture alliances with leading international companies like Mitsui Sumitomo, Foskor, Cargill, Groupe Chimique Tunisien, Winterthur Technology Group and Morgan Crucible. The Group has a wide geographical presence panning 13 states in India and 5 continents.
Renowned brands like BSA, Hercules, Ballmaster, Ajax, Parry’s, Gromor and Paramfos are from the Murugappa stable. The organization fosters an environment of professionalism and has a workforce of over 32,000 employees.