Results     30-Jan-07
Analysis
Finolex Industries
Sluggish operating performance offset by gains at the non-operating end
Related Tables
 Finolex Industries: Results
 Finolex: Segment Results
Both PVC resin and PVC pipes segments contributed to the healthy growth of 69% y-o-y in revenues to Rs 294.65 crore. However, high raw material cost reduced the OPM by 640bps to 9.7%. With increase in the non-operating income, the PAT amounted to Rs 22.88 crore, up by stable 56% y-o-y.

Commenting on the Q3 performance, Mr. S.S. Dhanorkar, Asst. Managing Director, Finolex Industries, said "sustained demand pull coupled with increase in quantity consequent to expansion and increase in other income have resulted in better bottom line as well as top line growth. The Company’s wide distribution network across the country is enabling increasing the market share from all the regions".

As per the company, the outlook for PVC resin is bright with the domestic demand overriding the domestic supply. The global demand for PVC resin is growing at 3.5% p.a while demand in India is expected to show double-digit growth in the current year. The PVC pipes demand is anticipated to move up in the coming years due to various Government initiatives at Central and State levels. The strong demand growth seen in the 3rd quarter is expected to continue in future.

Finolex makes PVC resins. Also it is the largest PVC pipe manufacturer in India. FIL offers a wide range of PVC pipes and fittings, for diverse applications in agriculture, housing, telecom, industry, etc., ranging between 20 mm diameter to 400 mm diameter. FIL also manufactures speciality pipes and fittings, namely SWR (Soil, Waste and Rain Water) pipes and fittings for construction industry. Recently completed the expansion of its PVC Resins.

Quarter Results

The topline recorded strong growth of 69% y-o-y to Rs 294.65 crore courtesy the solid rise in both the segment’s sales. Sales of PVC segment spurted by 66% y-o-y to Rs 290.97 crore. PVC pipes sales surged by 53% y-o-y to Rs 119.79 crore. PVC contributed 71% to the total sales while PVC pipes, 29%.

Despite the impressive sales growth, the OPM was pulled down by 640bps to 9.7% due to higher raw material cost. Raw material cost, as % to sales (net of stock), rose by substantial 1130bps to 73%. Power & fuel cost reduced by 330 bps to 9%. Staff cost slumped by 30bps to 2%. Other expenditure declined by 230bps to 6%. The staff cost, power & fuel cost and other expenditure reduced the impact of surge in the raw material cost. The operating profit grew by 2% y-o-y to Rs 28.71 crore.

On the non-operating front, the other income registered solid rise by 232% y-o-y. Further, the net interest expense declined by 42% y-o-y and depreciation increased by 26% y-o-y. Thus the PBT expanded by 77% y-o-y to Rs 30.86 crore. With adjustment of tax provision (inclusive of current tax, FBT and deferred tax), the PAT recorded satisfying 56% y-o-y growth of Rs 22.88 crore.

YTD Performance

The company posted healthy growth of 37%y-o-y in its revenue in the nine-month period in FY07. Despite increase in total expenditure, the OPM settled 280bps higher at 13.6%. The operating profit grew by substantial 72%y-o-y to Rs 97.84 crore. Its other income surged by 23% y-o-y. The interest outgo reduced by 3% y-o-y. Depreciation cost increased by 21% y-o-y. The resultant PBT gained a huge growth of 118% y-o-y to Rs 75.25 crore. Due to high tax provision, the PAT settled with 95% y-o-y rise of Rs 52.43 crore.

Quarter Segment Performance

The company caters to two segments – PVC resins and PVC pipes.

PVC Resins: The segment’s sales witnessed significant spurt by 66% y-o-y to Rs 290.97 crore. Its contribution to the total sales increased by 200bps to 71%. However, its PBIT margin reduced by 100bps to 7%. Thus its PBIT was confined to 47%y-o-y rise amounting to Rs 21.37 crore. The capital employed in the PVC resins segment reduced by 12% y-o-y to Rs 537.86 crore.

PVC Pipes: Its sales grew by stable 53% y-o-y to Rs 119.79 crore. It represented 29% of the total sales compared to 31% in Quarter Dec ’05. It managed to retain its PBIT margin at 7% and thus achieved 54% y-o-y increase to Rs 8.43 crore in its PBIT. Its capital employed was lifted by 13% y-o-y to Rs107.99 crore.

Current News

The company plans to expand its PVC pipes capacity by 20000 tonnes to 85000 tonnes. It will invest Rs 15 crore towards the expansion.

The company plans to enter the Indian insurance industry It is in intial stage of negotiations with foreign companies in Europe and US.

The promoter’s stake as on 31st Dec ‘06 stood at 18.85%.

Currently the stock is trading around at Rs 86.30 per share on BSE with an annualized EPS of Rs 7.40 as on 31st Dec ’06.

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