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EID Parry: Rains spoil the quarter - Views on News from Equitymaster

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EID Parry: Rains spoil the quarter
Feb 9, 2009

Performance summary
  • 67% YoY decline in sugar sales coupled with 80% YoY drop in cogen sales leads to a 64% YoY drop in EID Parry’s standalone topline during 3QFY09.
  • Suffers operating losses during the quarter on account of decline in sales
  • On account of lower sales and losses at operating levels, the company reports net loss during 3QFY09.
  • Consolidated sales are higher by 211% YoY on account of higher farm input sales, while profits jump 108% YoY.


Standalone picture
Rs(m) 3QFY08 3QFY09 (%) Change 9mFY08 9mFY09 (%) Change
Net sales 2,138 774 -63.8% 4,641 5,695 22.7%
Expenditure 2,307 935 -59.5% 5,068 5,442 7.4%
Operating profit (EBDITA) (169) (161)   (427) 252  
EBDITA margin (%) -7.9% -20.7%   -9.2% 4.4%  
Other income 116 95 -18.1% 311 575 85.0%
Interest 69 22 -67.9% 98 146 49.7%
Depreciation 110 126 14.4% 326 371 13.7%
Profit before tax (232) (214)   (540) 310  
Extraordinary item - -   - 7,492  
Tax 2 -49   5 1,820 37818.8%
Profit after tax/(loss) (233) (165)   (545) 5,982  
Net profit margin (%) -10.9% -21.2%   -11.7% 105.1%  
No. of shares (m) 89.3 89.3   89.3 89.3  
Diluted earnings per share (Rs)*         71.2  
Price to earnings ratio (x)*         2.0  
* 12 month trailing earnings

What has driven performance in 3QFY09?
  • 67% YoY decline in sugar sales coupled with 80% YoY drop in cogen sales led to a 64% YoY drop in EID Parry’s standalone topline during 3QFY09. During the quarter, the company crushed 0.13 m tonnes of cane as compared to 0.52 m tones, down by 75% YoY in the corresponding period last year, mainly on account of heavy rains in Tamilnadu. While the realisations were higher, on account of lower volumes, the topline declined. However during 9mFY09, the sales were higher by 23% YoY driven by 27% YoY growth in sugar sales. Bio products saw a 21% YoY increase during 9mFY09.

    Segment-wise performance
    (Rs m) 3QFY08 3QFY09 (%) Change 9mFY08 9mFY09 (%) Change
    Sugar 1,838 600 -67.4% 3,742 4,739 26.7%
    PBIT margin (%) -16.5% -37.0%   -25.5% -6.5%  
    % of revenue 85.2% 76.9%   78.6% 81.5%  
    Co-generation 169 34 -79.7% 680 672 -1.3%
    PBIT margin (%) 13.3% -157.0%   33.7% 32.1%  
    % of revenue 7.8% 4.4%   14.3% 11.5%  
    Bio products 122 134 9.4% 294 356 20.8%
    PBIT margin (%) 17.7% 7.3%   10.8% 6.5%  
    % of revenue 5.7% 17.2%   6.2% 6.1%  
    Others 29 12 -58.7% 45 50 -1.1%
    % of revenue 1.3% 1.5%   0.9% 0.9%  
    Total revenues 2,158 780 -63.9% 4,761 5,816 22.1%

  • The company suffered operating losses during the quarter on account of decline in sales. For 9mFY09, the company was able to earn operating profits as compared to losses last year. Lower raw material costs aided the jump. During the quarter, sugar and cogen segments reported PBIT losses on account of lower sales.

  • The company reported net loss during 3QFY09. During 9mFY09, excluding extraordinary item, the company reported Rs 1.5 bn losses.

  • On the consolidated basis, the company reported topline growth of 211% YoY driven by higher farm input sales during the quarter. The profits were up 108% YoY during 3QFY09 inspite of 5.5% drop in operating margins. Higher other income and lower depreciation aided the jump.

What to expect?
At the current price of Rs 144, the stock is trading at 2.0 times its 12 month trailing earnings. While the quarter was bitter on account of lower cane offtake, the 9 month performance was better as compared to last year. EID Parry owns cane crushing capacities of about 17,500 tcd with 40 kl per day distillery and capacity to cogenerate 65 MW of power. This is expected to touch 19,000 tcd over the next year, while adding additional distillery capacity and 20 MW of power. Further, as part of the growth strategy for the Nutraceuticals business, the company has acquired a 48% strategic stake in U.S. Nutraceuticals LLC., during the quarter.

With the sugar sector witnessing lower production for the next 2 years, sugar prices may sustain firm trends. However, the input price would also be on higher side on account of lower production and regulated nature of the industry.

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