Murugappa Group continues Investment focus in a difficult year
Capex at 1750 Crores including 850 Crores in acquisitions
Chennai, 3 May 2013: FY 2012-13, marked with a deficient monsoon, steep increase in critical input costs and an economic slowdown, was a year of mixed performance for the Murugappa Group. While the Engineering and Agri-businesses businesses had their share of challenges, the Financial Services businesses consolidated their position and grew their businesses aggressively and profitably. But the Engineering and Agri-businesses saw opportunity to acquire new businesses / enhance capacities and seized the opportunities that came their way. In a rather difficult year and environment, the Group invested 850 crores in acquisitions, as under:
The above acquisitions are part of the next engines of growth and will provide significant opportunities to the Group to scale up the respective operations.
Besides the above, the group companies continue to invest in all the facilities by appropriate Capex programmes both to expand their capacities and also to modernise the facilities. Significant capital expenditure initiated/incurred by the companies during the FY 2012-13 aggregate to 300 Crores, including the following:
In addition, a sum of around 600 crores was deployed under regular capital expenditure during the year. In all, the Group incurred a Capital Expenditure of 1750 Crores during FY2012-13, including acquisitions (FY 2011-12 1115 Crores).
Key highlights of FY 2012-13
The Group recorded a turnover of 22466 crores during 2012-13, (as against FY 2011-12 turn-over of 22314 Crores). Earnings before Interest, taxes, depreciation and amortization (EBITDA) stood at 2507 Crores (FY 2011-12 2692 Crores) and Profit Before Tax (PBT) was 1751 Crores (FY 2011-12 1850 crores).
Company wise performance
The summary of the Gross Sales and EBIDTA are as follows:
The Financial Services businesses Cholamandalam Investment and Finance Co and Chola MS General Insurance continued their upward growth, outperforming the market.
Disappointing monsoons, slower GDP growth rate, uncertainty of sugar decontrol measures (since then been announced) and absence of NBS policy in Urea, coupled with a depressed demand in the Auto sector and increased power and fuel costs led to pressures in both the topline and bottomline in Agri and Engineering businesses.
The Engineering businesses retained leadership positions in their served segments despite cost pressures and an overall drop in demand in the end-user industries in Auto and manufacturing.
The two top brands in the Group increased their Market penetration – Chola ended the year with 518 branches (last year 375), and TI Cycles retail network with 968 outlets (last year 800).
Sectoral Highlights – FY 2012-13
Key highlights in each sector are presented below:
For the year ended March 2013 Coromandel achieved a sales turnover of 9103 crore (previous year 9879 crore), lower by 8% over the previous year. The delayed monsoon during Kharif and deficit monsoon during Rabi in the key addressable markets, along with significant disparity in price between Urea & Phosphatic fertilisers affected the demand for Phosphatic fertilisers. Despite adverse market conditions, Coromandel maintained its market share on an All-India basis, with an increase in Andhra Pradesh. Coromandel commissioned its third complex train (C-train) in Kakinada which is capable of manufacturing all grades of complex fertilisers to meet the farmer requirements. Post commissioning of the C train, the capacity of Coromandel has gone up from 3.20 million MTs to around 4.00 million MTs.
Plant Protection Chemicals
The segment recorded good growth during the year despite unfavourable weather conditions. The integration of Sabero Organics Gujarat Ltd is progressing as per plan, and Sabero has recorded 8 crores profits against a loss of 64 Crores in FY 2011-12. The integration efforts will continue in FY 2013-14 as well.
The Specialty Nutrients Division and the Organic Fertilisers Divisioncontinued to grow in volume, and recorded good growth in FY 2012-13. The businesses are focusing on new product launches in FY 2013-14 in order to address the market requirements.
The Company’s retail centers (Mana Gromor Centers – MGC in Andhra Pradesh and Namma Gromor Centres – NGC in Karnataka) continue to expand the retail footprint, and currently operates 640 stores.
EID Parry (India)
EID Parry registered a turnover of 1965 crores on a standalone basis.
During the year, the division crushed 77 LMT (8% increase over FY 2011-12) across its 9 sugar factories (including those of its subsidiaries). Overall yield witnessed significant drop due to poor monsoon. Power and water availability in Tamil Nadu impacted the crop and led to lower recovery levels. Lower cane availability in Karnataka led to crushing levels remaining at last year’s levels.
The depressed demand levels in the overseas markets and disappointing monsoons led to turnover remaining at the last year’s levels.
Parry Nutraceuticals continued to retain its market leadership position in organic Spirulina, with a healthy growth.
Silkroad Sugars, a subsidiary of EID Parry, is in the process of commissioning its coal-based boiler, and is expected to commence operations during FY 2014-15.
EID Parry was chosen one among the six companies and was conferred the Best Managed Board award under the Aon Hewitt Best Managed Boards award.
Tube Investments of India
Tube Investments of India Ltd. (TII) registered a turnover of 3390 Crores on standalone basis for the year. Due to slowdown in customer industries mainly automobiles, company witnessed pressure on margins.
Tube Products of India (TPI), a leading supplier of precision tubes for the auto industry, witnessed a drop in demand for tubes and cold rolled strips due to slowdown in motorcycle and commercial vehicle segments. However the Tubular Component segment grew by 6% due to continued focus on value addition initiative. The margins were affected due to increase in power & fuel cost and time lag in passing on the entire cost increase to the customers.
TI Cycles (TICI) maintained its market share and All India Number 2 position with over 4 million cycles in the year. It continued the expansion of retail network and the total number of outlets stands at 968. TI Cycles organized around 3300 events all over India to promote cycling, continuing its core strategy of ‘selling cycling and not just cycles’. The margins continued to be under pressure due to product mix and inability to pass on the cost increases fully to the market due to competitive environment.
TI Metal Forming (TIMF), the market leader in car door frames, witnessed a drop of demand mainly due to de-growth of passenger car segment. There was also a delay in tender process for Railway wagons apart from severe price pressure due to competition. This resulted in lower volumes and price realisation thereby affecting the margins of the division.
TIDC India (TIDC) maintained volumes in the Chains segment, despite adverse market conditions. The sales of chain kits to the replacement market registered a growth of 30% and Fine Blanking division registered a healthy growth of 33% through a wider product portfolio for the passenger car and motorcycle markets.
Carborundum Universal Ltd (CUMI) achieved consolidated net sales of 1942 Crs for the year. Profitability of all businesses was under pressure. However, CUMI managed its working capital well and repaid loans to improve consolidated debt equity.
The industrial slowdown attributed to the muted growth trends in India and Russia had an adverse impact on the order books. Profitability margins were strained on the backdrop of rise in input costs and rupee depreciation.
The net sales registered a drop of 8%, arising from the drop in volumes in the Silicon Carbide business in India and Russia. The South African business also witnessed a volume drop.
The ceramics segment recorded a 9% increase in sales on a consolidated basis. Both the high alumina ceramics business and the super refractories businesses registered growth. The operations in Australia registered higher growth.
Cholamandalam Investment and Finance Co
Cholamandalam Investment (CIFCL) has recorded growth rates better than the industry by leveraging its broad-based product offerings and a deeper penetration of the existing customer base. The company disbursed a total of 12118 Crores, of which Vehicle Finance was around 81 % and Home Equity was 18%. The Profit Before Tax stood at 451 crores (registering a growth of 55% over FY 2011-12). The company launched its Home Loan and Corporate Finance Loan products during the year. The Company expanded its presence to 518 branches as on 31st March 2013 compared to 375 as on 31st March 2012. The additional branches are in Tier III and Tier IV locations across India. The company raised equity capital l aggregating to 300 crores during the year.
Cholamandalam MS General Insurance
Chola MS recorded a strong growth of 20% in topline and 82% in Operating Profit. The performance increased both in depth and width, with new product offerings and distribution channels leading to higher volumes in the retail segment and improved synergies in the cross-sell business with CIFCL.
During the year the promoters infused additional capital of 50 crores through a rights issue for growth and expansion plans. The company continued its outreach to the social sector through the Rashtriya Swasthya Bima Yojana (RSBY) scheme run by the Ministry of Labour & Employment, Government of India, in five different states (Gujarat, Maharashtra, West Bengal, Bihar and Jharkhand) and was awarded the Best Insurer Award for overall performance for the 3rd time in a row.
All the key roles have in place leaders with appropriate background, experience and capability. The Group continued to invest in its Leadership Development Programme, with a balanced approach to external and internal leaders. Towards this end, the Group strengthened its efforts to develop a cadre of leaders ground up. The Murugappa Career Development Plan launched last year gained momentum and was implemented in phases across the businesses.
Corporate Social Responsibility
Safe Harbor : Some of the statements in this news release that are not historical facts are forward looking statements. These forward looking statements include financial and growth projections as well as statements concerning our plans, strategies, intentions and beliefs concerning our businesses and the markets in which we operate. These statements are based on information currently available to us, and we assume no obligation to update these statements as circumstances change. There are risks and uncertainties that could cause actual events to differ materially from these forward looking statements. These risks include, but are not limited to, the level of the market demand for the products, the highly competitive market for the types of the products that we offer, market condition that would cause customers to reduce their spending for the products, our ability to create, acquire and build new businesses and to grow existing businesses, our ability to attract and retain qualified personnel, currency fluctuations and market conditions in India and elsewhere around the world, and otherwise not specifically mentioned herein but those that are common to industry.