Highlights of the call by Capital Market:
The consolidated net sales for Q2 FY14 inclined by 15% to Rs 1359.64 crore. The net profit was stagnant at Rs 72.4 crore.
The sales of Prefab building systems grew by 31% to Rs 303 crore, monolithic grew by 9% to Rs 263 crore, overseas custom molding grew by 22% to Rs 352.9 crore, domestic custom molding de-grew by 4% to Rs 235 crore, storage tank grew by 21% to Rs 75 crore and textile grew by 12% to Rs 130 crore. The margin in prefab was 23%, monolithic was 13.7%, storage tank was 10.7% and custom molding India was 15.3% & overseas was 9.6%. Textile had margin of 22.9%.
OPM was stagnant at 14.9%. The overall company's margin was under pressure due to monolithic business, Europe business and domestic custom molding. For whole year, the mgmt expects pressure on margin.
Healthy execution in prefabs as a result of ongoing spending on social schemes maintained the robust growth in prefabs. The custom molding business rose 10% largely because of traction in overseas business.
The mgmt said that it expects challenges for next 2 quarters also in monolithic business. However, the company has improved its gross and EBIDTA margin. Presently, it is stuck with 2 sites, which it will close down.
The overseas custom molding business, which is largely centered in Europe, has seen a healthy growth of 22%. Strategically, the acquisition of Poschmann holdings is shaping up well in terms of its restructuring plan, though it is yet to realize its full value in terms of top-line growth and margins in the coming quarters. The company is expecting break even in Poschmann at PAT level by next year and will have margin of around 8% - 9%. Efforts are on to push for better utilization of capacities and rolling out value added products as the economy gradually improves. In custom molding, the company is looking at inorganic opportunities to acquire specific customer of niche technology to bolster its offering.
The sluggishness in domestic economy has resulted in falling automotive sales, thus resulting in lower capacity utilization, affecting domestic custom molding business. The company wants to diversify from automotive to electrical and off the road vehicles segment. This will help in de-risking from the fluctuating fortunes of the passenger car segments,
Better utilization and US $ appreciation, resulting in better pricing for products, thus helping textile business. 70% - 75% of textile sales is associated with dollar pricing, whether it is exported or not.
The company is setting up new spinning unit of textile division in Gujarat under the new textile policy of the state government. The company is implementing approximately 3 lakh spindles in Phase I which will come up in next 15 months at projected cost of approximately Rs 1800 crore. This is likely to be ramped up to 10 lakh spindles (Phase II will have 3 lakh spindles and Phase III will have 4 lakh spindles) in 5 years time horizon. 75% of the products from it will be exported. It will have EBIDTA margin of 28% - 29% and IRR of 19%, as per management's calculation when Rupee was at 55 for US $. The mgmt said that it will raise as much debt as possible for this plant.
The company's consolidated capex for FY14 will be around Rs 450 crore.
The company last quarter hedged around $ 80 mn, which now stand at $ 50 mn, out of which $ 30 mn is long term hedge and $ 20 mn is short term hedge.