The Murugappa Group Achieves EBIDTA Growth Of  22% PBT grows by 29% to Rs. 1354 Crores

 

Chennai, 6th May 2010: The Murugappa Group recorded significant growth in profits during 2009-10. EBIDTA grew by 22% at Rs. 1879 Crores (LY Rs.1535 Crores) and PBT excluding extra-ordinary income grew by 29% at Rs.1354 (LY Rs.1054 Crores). Group achieved turnover of Rs. 13617 Crores during 2009-10 (LY Rs. 15907 Crores). The drop in turnover was attributed to sharp drop in key raw material prices for Coromandel International Ltd. Excluding Coromandel International Ltd, the Group turnover grew by 11%. The Group made a capital expenditure of Rs. 311 Crores during FY2009-10, excluding acquisitions (LY Rs.850 Crores).

2009-2010 key Highlights

In the year 2009-10, the Murugappa Group was able to ride the wave of economic rebound powered by enterprise wide efficiency drive. The year’s performance was marked by strong profit growth in the Agri-businesses and a decisive come back by the Engineering and Financial Services businesses.

Summary of gross sales and profitability (EBIDTA) is presented below:

Rs. crore

Group companies

Gross sales

Growth over last year

EBIDTA

Growth over last year

Coromandel International Ltd. (Coromandel)

6431

-32%

846

-1%

EID Parry (India) Ltd. (EID)

1195

53%

345

63%

Tube Investments of India Ltd (TII)

2454

11%

265

132%

Carborundum Universal Ltd (CUMI)

1329

6%

243

22%

Cholamandalam DBS Finance Ltd. (CDFL)*

952

-16%

42

246%

Chola MS General Insurance Company Ltd. (CMSGICL)

785

15%

19

-44%

Coromandel Engineering Co Ltd (CEC)

89

-11%

5

-38%

Other Businesses

382

25%

114

18%

Total

13617

-14%

1879

22%

Inclusive Profitable Growth during the Recovery Phase

FY2009-10 began on a difficult note due to the lingering effect of the financial crisis and the note of pessimism caused by rising inflation. Yet, from the second quarter, the financial stimulus driven economy improved smartly and recorded higher Industrial Production.

The Group’s businesses capitalised on the overall recovery to post impressive growth in profits, supported by key strategic initiatives including

  •  Continued focus on organic and inorganic growth

  •  Concerted efficiency measures

The Group is well poised to achieve the milestone of US$ 7.2 billion by 2013-14.

During the year, the Engineering Businesses of the Group made a strong comeback and posted a jump in profits on the back of recovery in the user industries. The Sugar Business reported high earnings driven by higher realization in sugar prices. The top line of the Fertilizer business declined due to steep fall in the price of raw materials. However, the EBIDTA was maintained due to better operational efficiencies and increased contribution. The Financial Services companies of the Group weathered the storm and have positioned themselves to move into a higher growth path. The diversified businesses of the Murugappa Group delivered another year of solid performance thereby contributing to the overall profit of the Group.

Sectoral Highlights – FY 2009-10

Key highlights in each sector are presented below:

Profitable Performance of Agri Businesses (Coromandel International, EID and Parry Agro)

The Agri businesses – Coromandel International Limited (Coromandel), EID Parry (India) Limited and Parry Agro Industries Limited posted strong profitability during the year.

Coromandel International Ltd

With a vision and global ambition to transform into a diversified Agri-solutions provider, Coromandel has changed its name from Coromandel Fertilizers Limited toCoromandel International Limited. The company repeated its impressive profit performance in spite of the correction in the international raw material prices thus impacting the turnover growth. Improved operational performance across all businesses and increased contribution from Specialty Nutrients Division and Plant Protection Chemicals Division (Pesticides) enhanced the company’s profitability.

The Specialty Nutrients Division (SND) set up last year has entered into a 50:50 Joint Venture(JV) with Chile based SQM with an intent to grow three-fold in turnover within three years of its inception. This JV will help scale up the capacity and product offerings in the ‘Water Soluble Fertilizer’ (WSF) segment. The Division is envisioning scaling up the volume of organic manure (Municipal compost) to 2 million ton by 2014 and is making continuous efforts for new contracts and procurement.

The Plant Protection Chemicals Division (Pesticides)registered a sales growth of 13% during the financial year. A Technology Development Centre has been established in Ankleshwar to expand its product base. The business presence in Brazil helped to capture maximum business from Argentina. Further, the Company is exploring suitable acquisition targets to expand and grow in key global markets.

To further integrate backward for key raw materials, the Company is on the look out for reliable source of Ammonia and Rock phosphate.

Continuing the success story of the retail initiative Mana Gromor, with 423 centers under operation in Andhra Pradesh, Coromandel plans to extend the centers to Karnataka through a Franchisee model. During the year, the Company increased penetration of Life Style Products (LSP) to 212 centers. The LSP centers were recently rebranded asMitra to bring a unique Brand Identity. By introducing new products and services, Coromandel is confident of creating value to the farmer community.

EID Parry (I) Ltd

EID Parry registered a strong performance by growing 53% in top line and 63% in EBIDTA on the back of higher sugar price realization.

The Sugar Division acquired 76% equity stake in Karnataka based Sadashiva Sugars that helped EID to gain a strong footing in the second largest sugarcane producing state. During the year, the new distillery (45klpd) at Nellikuppam is put into operations. The co-generation at Pettavathalai started exporting power from Jan 2010. Sivaganga distillery stabilized its operations and reached full production capacity at 60 klpd.

Namadhu Parry Mayyam (NPM), service centers for cane farmers grew to 54 Operational NPMs in every Divisional area of 5 sugar units in Tamilnadu. The success can be gauged from the total transactions of Rs. 3.3 Crore covering 22000 acres in 2009-10. On this successful note, the Company is planning to open 24 more new NPMs in the coming year.

Silk Road Refinery, a JV with Cargill, at Kakinada will be functional soon and is expected to be a significant growth driver for business with an estimated refining capacity of 600,000 tons. The Gas allocation has been approved by EGoM (Empowered Group of Ministers) and the plant is expected to be commissioned this month.

Parry Nutraceuticals Division successfully enhanced its production of Spirulina, a health supplement, and also increased the sales by 36% over last year. The Company commenced Omega 3 trials and its Life Sciences Division initiated projects like Bio Catalyst Transformation, Anti Inflammatory Formulation, etc. Valensa International registered a growth 73% over last year. Going forward, the Division plans to develop new formulations and businesses.

Bio Product Division registered a steep hike in sales of ‘AbdA’ by nearly three times over the last year. Overall, the Division faced a slight reduction in sales due to sluggishness in export market. The Company has obtained license to manufacture 3 new products under Bio Products category that will be introduced shortly.

Parry Agro Industries Limited posted a 31% growth in sales buoyed by the demand-supply gap and less carry over stocks resulted in higher tea price realization. Continuing its expansion through inorganic growth, the Company acquired Martycherra estate in the North East and RPS factory in Sirajuli. To avoid the vulnerability of commodity business, the Company focused on Value Added Products like Parrys Supreme, K-Chai and Vijay.

Strong rebound in performance from the Engineering Businesses (Tube Investments of India Ltd and Carborundum Universal Ltd)

Tube Investments of India Limited

Tube Investments of India Ltd (TII) registered an overwhelming performance by growing 132% in EBIDTA and 11% in turnover.

With breakthrough thinking, efficiency improvements and commitment to the environment, TII continues to be a leader in every segment they operate in. Going forward, improvement of operational efficiencies and emphasis on the growth segment will be major focus areas for the Company

TI Cycles (TICI) launched the ‘Schwinn’ range of leisure and recreation bicycles aimed at establishing cycling as a fitness, sport and recreation solution. The Division sells over 100 ‘performance bikes’ (Bianchi/ Cannondale/Schwinn) per month on an average through its niche retail format ‘Track & Trail’. Besides focusing on the adventure segment, the Division also launched ‘Powerassist’ – range of electric bicycles, catering to the utility segment.

As part of its core strategy of ‘selling cycling and not just cycles’, TI Cycles organized over 3000 events pan-India to promote cycling as a ‘Faster, Fitter and Greener’ mode of transport. To enhance the buying experience of the customer, the company operates 482 retail outlets, of which 134 are exclusive outlets.

BSA Motors launched two new models this year- ‘Roamer Able’ – the country’s first E-Scooter specially designed for the differently abled and ‘Edge’ – powered by 1250 watts, the highest in the category.

TI Metal Forming (TIMF), the market leader in car door frames, commenced supplies to Tata Motors for ‘Nano’ from its plant in Sanand. As part of its diversification strategy, the Division began operations in Uttarakhand to cater to the growing Railway Wagon Segment. This segment contributed around 35% of TIMF’s total revenue in 2009-10. Well poised to capitalize on the growth in the Railway Wagon Segment, TIMF is expected to grow two-fold in the near future.

TIDC India Ltd (TIDC) acquired a controlling stake in Sedis, France, aimed at tapping the huge potential in Industrial and Engineering Class Chain segment. This acquisition will help the Division enter into new technologies, strengthen existing technologies and emerge as a leading global player in this segment. The automotive chain manufacturing facility in Uttarakhand, set up the previous year, currently caters completely to the demand of local customers.

Tube Products of India (TPI), a supplier of precision tubes for the auto industry, continued to grow in the Tubular components segment in line with their strategy to lock-in key customers. TPI witnessed a major increase in profitability in spite of the export market being sluggish.

Carborundum Universal Limited

Carborundum Universal Ltd (CUMI) ended the year on a positive note with a revenue growth of 6% with EBIDTA growth of 22% aided by the strong performance of the Indian operations. Despite competition from global players, CUMI with its diversified product portfolio and focus on niche product segment continues to be the market leader in the highly competitive domestic abrasive market.

CUMI’s China operations became a 100% subsidiary of CUMI in 2009-10. This will help address the abrasive requirements in the fastest growing market and also complement CUMI’s other abrasive businesses. CUMI China’s focus in 2010 will be towards consolidating the existing investments.

Industrial Ceramic Division’s consistent strategy of increasing the customer base and expanding the export market has helped counter the slowdown. The state of art metalized cylinders plant, set up in 2008-09, reached its full capacity during the year. The Division will continue to focus on increasing the capacity and customer base for exponential growth going forward. Steady industry demand and resumption of postponed project orders is expected to help the growth of CUMI’s Super Refractories Division.

Electro Minerals Division is expanding the Micro Abrasives capacity in order to take advantage of the opportunities in the Photovoltaic industry, especially in the export market. The new facility will be commissioned in three phases starting April 2010. The focus in 2010-11 will be towards market development and establishment of customer base.

Volzky Abrasive Works (VAW), a subsidiary of CUMI and the world’s second largest producer of Silicon carbide, continued its good performance with the profit growth of 31% over last year. CUMI is planning an increase in capacity in order to leverage its market leadership position. CUMI’s investment in Foskor Zirconia (Proprietary) Limited, South Africa, is expected to yield desired results with the revival in growth of world refractory.

Financial Services (CDFL & CMSGICL)

Cholamandalam DBS Finance Ltd

Cholamandalam DBS Finance Ltd., increased disbursements by 93% over last year in the overall asset finance business, with the surge in commercial vehicle sales. The aggregate disbursement of Rs 3866 Crores during 2009-10 was the highest ever done in the vehicle finance and home equity verticals. The asset finance book (managed assets) grew by 41% to Rs.5948 Crores (LY Rs.4208 Crores). The net credit losses of the asset finance business as a percentage to average assets declined from 1.49% to 1.02%. During the year 2009-10, the number of branches was increased to 180 from 155 last year.

Loan losses in the personal loan segment were offset by the soft interest regime, rationalization of costs and increased profits on higher volume of business from the Asset Financing Verticals. Concerted efforts reduced the loan receivables outstanding (net of provisions) to Rs 234 Crores as on 31-3-2010 and is expected to bring it down to nil during the current financial year. In line with the strategic direction to focus on core activities of asset financing, the company exited from Personal Loan business and sold off the Mutual fund business to L & T Finance during the year. In March 2010, the Group acquired the 37.48% stake held by DBS Bank, Singapore, in Cholamandalam taking the Group’s total holding to 74.96%. Tier II capital aggregating to Rs.250 Cr was infused in to the company and the capital adequacy ratio (CAR) as on March 31, 2010 stood at 14.69%.

During the year, ICRA changed the AA (-) ‘negative outlook’ rating to AA (-) ‘“stable’ and also re-affirmed A1+ rating to the short term debt and working capital limits. However, ICRA has put the aforementioned ratings under watch, in view of the change in the Joint venture status of the company

DBS Cholamandalam Securities Limited (DCSec) and DBS Cholamandalam Distribution Ltd (DCDL), the subsidiaries of Chola DBS, have performed well. Several steps taken to rationalize the operations of the Securities business and the Distribution / Wealth management business led to a complete turnaround in the operations of the businesses. The companies posted a Profit before tax of Rs.3.48 Crores and Rs.6.89 Crores respectively as against the losses of Rs.9.01 Crores and Rs 18.25 Crores recorded during the previous year

Cholamandalam MS General Insurance Co. Ltd

Chola MS General Insurance Co Ltd registered a growth of 15% in Gross Written Premium over 2008-09, higher than the industry average of 13%. However, profit was impacted by intense competition, higher discounts in Premium, highly adverse claims in the group health portfolio and drop in Reinsurance commission rates. During the second part of the year, the Company judiciously rationalized its exposure in various business lines including some loss making lines. The Company enhanced its capital base by infusing Rs. 125 Crores during 2009-10.

In order to enhance customer reach through new distribution tie-ups, Chola MS tied up with Central Bank of India and South Indian Bank during 2009-10. The Company also made significant progress in rural sector and Government RSBY scheme and was awarded four large districts in West Bengal and five districts in Maharashtra and three districts in Bihar.

Continuing its product innovation strategy to gain leadership in identified segments, the Company introduced Chola Protect 360 – a value added insurance policy that offers complete car protection. In six months, the Company sold 12000 policies of ‘Chola Protect 360’ indicative of the consumer need for such innovations. Chola MS recently launched ‘ClickEasy Insurance’ enabling customers to buy and renew Chola Motor policies online. Soon, the Company plans to market its other products online and also launch mobile commerce which would allow customers to buy and renew policies through mobile phones.

Other Businesses

  • Coromandel Engineering Company Ltd. (CEC), the Property Development and Civil Construction business of the group, performed well in second half of the year as the construction segment showed signs of increased activity in the light of customer confidence back on the track. In a vision to grow aggressively, the business is focusing on contracts involving commercial complexes, shopping malls and entering into large infrastructure projects through turnkey contractors. In order to stimulate their growth plan, the Company has been listed on the Bombay Stock Exchange. With the better performance of the core sector coupled with increased capital investments, the company is expected to be benefited in the coming years.

  •  Parry Enterprise India Ltd (PEIL) witnessed growth across all its Divisions. The Polynet Division is making a sustainable growth and the Division is developing new products and application for its polymer products to achieve exponential growth. The General Marketing Division is expanding its product portfolio in high value food ingredient to drive growth. The Packaged Water Division is making sustained effort with major institutions to increase the market share. The Travel Division is focusing on offering total travel solutions to customers. The Green Field project for flexible packaging laminates in Baroda is in the phase of stabilization. The breakthrough orders are expected to materialize in the forthcoming year from the major FMCG companies which would help the business to achieve the desired return on invested capital. The Flexi division obtained ISO 22000 certification which gives the initial advantage over competitors.

  • Ambadi Enterprises Ltd and its subsidiary Parry Murray, the high end furnishing and floor covering business of the group which majorly exports to European and American market, performed fairly good in 2009-10 considering the slump in overseas markets. Two units of Ambadi in Kannur, during the year, obtained GOTS (Global Organic Textile Standard) certificate which would help the company to be more resourceful producer with all round capability, as organic products are being requested from all customers.

  • Laserwords, the publishing services company of the group, underwent a difficult phase in 2009-10 due to the sluggishness in US market which impacted the publishing business severely. In order to broaden the horizon and to de-risk its dependence on the US market for publishing services, business is foraying new products and services to its existing as well as potential new customers. In 2009-10, business established SEZ unit to focus on ODC contracts (Offshore development contract) from major publishers.

  •  Parry Infrastructure Company Pvt Limited (Parry Infra), a 100% subsidiary company of EID Parry (India) Limited, is pursuing in creating value for the surplus properties of the group by either outright sale or property development. Currently, Parry Infra has plans to develop residential apartments in 2 locations in Chennai at Kotturpuram and ABM Avenue.

Key developments in April 2010

Coromandel International Ltd

The new ‘Nutrient Based Subsidy policy’, with effect from April 1, 2010, will bring better prospects to the company due to its leadership position in complex fertilizers. Also, the company will utilize its R&D capabilities to introduce innovative products to take advantage of the altered business environment.

EID Parry (I) Ltd

Continuing its expansion through inorganic growth, EID Parry, recently acquired a majority equity stake in GMR Industries Ltd. The acquisition of GMR Industries will add 11,000 TCD crushing capacity, 46 MW cogen and 95 KLPD distillery to EID’s present capacity. The deal will mark EID Parry’s entry into Andhra Pradesh and also consolidate its position as a leading sugar manufacturer in cane rich areas of north Karnataka. It will increase the number of integrated complexes and provide EID Parry a platform to tap the sugar markets other than Southern India. With these acquisitions, the capacity has raised to 32500 TCD, 146 MW cogen and 230 KLPD distilleries.

Cholamandalam DBS Finance Ltd

In April 2010, the private financing arm of the World Bank, International Finance `Corporation, has proposed to pick up 9.92% of stake in Cholamandalam DBS. IFC’s investment augurs well for the company as it would help to get a long term strategic institutional investor apart from helping the company in raising long term debt and entering infrastructure financing.

People Paradigm

The Group continued its focus on leadership development in line with its future plans. The Murugappa group also partners with world-class universities like Harvard, Wharton, INSEAD, LBS, IMD, IIM, and Stern School etc to hone the business and leadership acumen of its employees through customized courses.

Corporate social responsibility

  • As part of the Group’s ongoing corporate social responsibility initiatives, Rs.3.62 Crores was contributed last year to the AMM Foundation (AMMF) and Shri AMM Murugappa Chettiar Research Centre (MCRC).

  • The Hospitals run by the AMM foundation treated over 8 lakh as out-patients and over 13000 as in-patients in the last one year.

  • From among the various educational institutions under the umbrella of AMMF, the TI Matriculation HS School earned the distinction of being the first school in South India and among one of the few schools in the country to receive the National Accreditation Board for Education and Training (NABET) certification by the Quality Council of India (QCI).

About the 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 companies under its umbrella, of which seven are listed and actively traded in NSE & BSE. Headquartered in Chennai, the major companies of the Group include Carborundum Universal, Cholamandalam DBS Finance 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 Auto Components, Abrasives, 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 and Groupe Chimique Tunisien.

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.

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.