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Raymond: Extraordinary gains

Apr 24, 2001

Raymond Limited has recorded a 125% decline in sales for the fourth quarter ended 31st March 2001 to Rs 14,571 m. The drop in sales in vindicated from the fact that the company sold both its steel and cement division, which contributed to around 51% of the FY00 turnover of the company.

(Rs m)FY00FY01Change
Sales 16,579 14,571 -12.1%
Other Income 184 157 -14.4%
Expenditure 14,184 13,388 -5.6%
Operating Profit (EBDIT) 2,395 1,182 -50.6%
Operating Profit Margin (%)14.4%8.1% 
Interest 946 799 -15.5%
Depreciation 997 814 -18.4%
Profit before Tax 636 (273)-143.0%
Other Adjustments (277) 3,906  
Tax 43 310 629.4%
Profit after Tax/(Loss) 317 3,322  
Net profit margin (%)1.9%22.8% 
No. of Shares (eoy) (m) 75.1 75.1  
Diluted number of shares 75.1 75.1  
Earnings per share (Rs) 4.2 44.2  

The company was expected to save more than 30% of its total raw material costs as a result of this disinvestment. But the decline is lesser than what we had expected as both these divisions contributed to the turnover in the first quarter of the current year. Raw material costs as a percentage of sales have dropped significantly from 28.2% in FY00 to 24.5% in FY01. Going forward, operating expenditure as a percentage of sales is expected to drop from 85.5% in FY00 to 75.6% in FY02.

Lowering costs…
(Rs m)FY98FY99FY00FY01UA
Material cost 4,076 4,222 4,672 3,575
% of sales33.8%32.9%35.6%24.5%
Manufacturing costs 3,403 3,140 3,318 3,238
% of sales28.2%24.4%25.3%22.2%
Labour costs 1,286 1,370 1,364 1,603
% of sales10.7%10.7%10.4%11.0%
Administration & selling 1,269 1,462 1,508 3,271
% of sales10.5%11.4%11.5%22.4%

The extraordinary item here includes net surplus from the sale of the cement and the steel divisions of Rs 4,472 m, loss on sale of debentures of Reliance Industries of Rs 980 m and other non-incurring expenditure of Rs 99 m. This also include the gain on stock transfer of steel and cement division of Rs 514 m (Raymond, in its second quarter results, had actually reported a loss on sale of steel plant to the extent of Rs 1,760 m). Excluding the extraordinary income, the company has actually reported a net loss of Rs 583 m.

The scrip is currently trading at Rs 110, at a P/E multiple of 9.4x the annualised third quarter earnings. It has proposed a dividend of Rs 3 per share (dividend yield of 2.9%).

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