Chennai, July 31, 2009: The Board of Directors of CUMI met today and approved the unaudited financial results for the quarter ended 30th June 2009.
Q 1 STANDALONE FINANCIALS
Net Sales for the quarter was Rs.162.5 crores, at about last year’s levels (Rs.157 crores). Exports registered a growth of 12%, from Rs. 30 crores to Rs. 34 crores. The strong performances of the Electrominerals and Ceramics businesses helped the Company to maintain its turnover in a market which is yet to shed its sluggish trends. While overall business sentiment in India has improved during the quarter, it is yet to translate into stronger demand pull for the Company’s products. The first quarter performances of the current year must also be viewed in the light of the fact that performance during the first quarter of last year was particularly strong with a 23% growth and the market downturn commenced from Q3 of last year. Though international markets are yet to recover from their recessionary trends, the Company’s focus on certain niche market product lines helped exports to register an increase.
Input costs in certain product lines resulted in pressure on margins.
EBITDA (without reckoning the other income, which primarily comprises of the dividend income from subsidiaries) grew from Rs. 25 crores to Rs. 29.5 crores, a growth of 17% primarily due to lower discretionary expenditure; EBITDA grew by 23% from Rs.29 crores to Rs.35.5 crores. Depreciation was higher at Rs.9 crores (previous year Rs.7 crores), since the most of the capital expenditure incurred last year was completed in the 2nd and subsequent quarters. Interest was also higher at Rs.7 crores (previous year Rs.4.8 crores) on account of the higher borrowing levels.
Consequent to the above, the profit before tax increased from Rs.17 crores to Rs. 19.4 crores and profit after tax increased from Rs.11.1 crores to Rs.13.9 crores.
Abrasives achieved a sale of Rs. 93 crores (previous year Rs.96 crores), a decline of 3% compared to last year. Domestic Sales (including Traded), though marginally lower than the corresponding quarter of previous year, was sequentially higher than Q4 of 2008-09. Exports was lower by 37% due to the sluggish international markets.
Most of the customers were operating at less than peak capacities and this impacted off-take. Despite this, sales was maintained at about last year levels, by increased focus on newer customer segments and those less impacted by the slowdown, market share shift in certain segments and also retail initiatives.
Exports showed a steep decline over last quarter because of the sluggish overseas markets. Given the overall concerns on financial liquidity of several businesses, the division adopted a cautious approach in its sales effort.
PBIT witnessed a decline, primarily on account of the higher cost of brown fused alumina which is a key input for this business. However raw material prices have shown a downward trend and the benefits of this will be realized in the subsequent quarters.
Sales registered a 10% growth, from Rs. 38.5 crores to Rs. 42.4 crores. Metallised cylinders (for which a dedicated plant was commissioned last year) has gained good acceptance with certain key customers and sales has stabilized. Increased competition was faced from imported products in low end grinding media product line. Export sales witnessed a 23% growth. Operating profit (PBIT / Sales) declined by 8% compared to last year, because of the impact of the higher depreciation of the investments in new facilities, both in super refractories and in metallised cylinders businesses.
The division reported a very strong performance, with the turnover moving from Rs. 30.7 crores to Rs. 37.4 crores, a growth of 22%. All product lines viz., brown fused alumina, white fused alumina and silicon carbide performed well. The growth was mainly driven by the continued strong performance on the export front, which registered a 45% growth. The increase in top line, helped PBIT increase by 51%.
Construction of the anticorrosives facility in Vellore District has been completed and will be commissioned in July 09..
The project to manufacture silicon carbide microgrits in Cochin SEZ is progressing in a phased manner. The first module is nearing completion and will be in operation in October 2009.
Consolidated net income was Rs. 282 crores (previous year Rs. 296 crores). The decline in sales was primarily on account lower sales of abrasives in Volzhsky Abrasive Works, Russia (‘VAW’) due to the sluggish market conditions in Russia, accentuated by adverse foreign currency translations. Silicon carbide sales was at about last year levels, helped by better price realization. Notwithstanding lower sales, VAW reported strong growth in the bottom line thanks to reduction in input prices and excellent control on costs.
In South Africa, Foskor Ziroconia (Pty) Ltd. (‘FZL’) temporarily suspended fusion operations to liquidate inventories. The finished products from FZL have been traditionally positioned to address the steel refractories segment, which has been seriously impacted with the market downturn. Efforts are underway to broadbase the industries and applications addressed. The Australian operations continued to perform well and maintained sales at last year levels. The operations benefited significantly by the strengthening Australian Dollar which helped to reduce input costs. CUMI Canada and Middle East performed well with sales increasing by over 28% and 15% respectively. The Chinese operations registered a steep decline due to lower export sales of abrasives and diamond tools. For optimising the operations, the Company is exploring demerger of the Abrasives and the Diamond/ Diamond tool businesses of the Chinese Joint Venture. The abrasives business would be housed in a 100% Subsidiary of CUMI, in China. At,Sterling Abrasives, Ahmedabad, sales declined by 16% due to the lower offtake from user industries.
EBITDA (without reckoning the other income) at Rs.46.4 crores was at last year’s levels of Rs.46.9 crores. EBITDA would have registered a strong growth, but for the losses incurred by the South African subsidiary and the Chinese Joint Venture. As a result of the higher depreciation and interest during the current year, profits before tax was lower at Rs.29.5 crores (previous year Rs.33 crores) Despite the above, profit after tax (including share of Associate and net of minority interest)) declined only marginally to Rs.19.2 crores (previous year Rs.19.9 crores) mainly because of the impact of lower deferred taxes.
Though there are some early indications of a recovery in India and China, uncertainty remains on whether this would be sustained. In the international markets, there are no signs of an early recovery. Against this background, focused action is being taken in each business to get more volumes/market share through new products and new customers. The Company expects to improve on the first quarter trends in the coming quarters. Focus will be on fuller capacity utilization and operational cash generation.
About the Murugappa Group
Headquartered in Chennai, the Rs. 15,646 crores (USD 3 billion) Murugappa Group is one of India’s leading business conglomerates. Market leaders in diverse areas of business including Engineering, Abrasives, Finance, General Insurance, Cycles, Sugar, Farm Inputs, Fertilizers, Plantations, Bio-products and Nutraceuticals, its 29 companies have manufacturing facilities spread across 13 states in India. The organization fosters an environment of professionalism and has a workforce of over 32,000 employees. The Group has forged strong joint venture alliances with leading international companies like DBS Bank, Mitsui Sumitomo, Cargill, Foskor and Groupe Chimique Tunisien has consolidated its status as one of the fastest growing diversified business houses in India.