The company had very high RONW before 2007, except in the year 2003. However the below average performance of 2003 can be attributed to spike in selling and administrative expenses. From 2006-07 onwards operating profit margin started declining from around 25% to 15%. The trend continued till 2012 when opm was 16%. In 2013 it improves to 19% and jumped to over 20% in 2014. Accordingly RONW improved from 13% to more than 20% in 2014.Good result in 2014 is achieved by lesser interest and depreciation charges which is likely to continue going forward. The question remains sustainability of high OPM. In the first half of FY2015, opm has reduced to 17%.
Going forward topline does not remain a problem. It appears that they will almost double the sales in next 2-3 years. Ample opportunity is there in Indian market and per capita coffee consumption is also growing. They have spare capacity in Vietnam plant also and can cater to higher topline without any additional cost. On profit numbers also this year Vietnam can come in profit, and switzerland can also show some profit, and this year can be good. But going forward, if the company has to be valued like a franchise business, opm has to be better. Again we are reduced to the same question- can it sustain higher margin?