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Paper Products: The extraordinary boost - Views on News from Equitymaster
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Paper Products: The extraordinary boost
Apr 27, 2010

Paper Products Ltd. has announced its 1QCY10 results. The company has reported a 11% YoY and 81% YoY growth in sales and net profits respectively. Here is our analysis of the results.

Performance summary
  • Sales for the company increase by 11% YoY during the quarter.
  • Operating (EBITDA) margins for the company fell by 4.1% during the quarter to end at 12.5%.
  • The fall in operating margins is attributable to higher raw material costs as well as higher staff costs.
  • Net profit grew by 81% YoY during the quarter. This increase comes on the back of a forex gain during the quarter as well as extraordinary income registered from sale of the company’s Nagpur factory. When adjusted for forex gains as well as for extraordinary income, net profit is seen to fall by 61% YoY.

    Rs (m) 1QCY09 1QCY10 Change
    Net Sales 1,447 1,607 11.0%
    Expenditure 1,208 1,406 16.5%
    Operating Profit (EBITDA) 240 201 -16.2%
    Operating Profit Margin (%) 16.6% 12.5%  
    Other Income 5 4 -27.1%
    Interest 6 1  
    Depreciation    75    82 8.6%
    Profit before Tax 163 122 -25.5%
    Extraordinary item      -   140  
    Tax    53    61 16.3%
    Profit after Tax 110 200 81.2%
    Net profit margin (%) 7.6% 12.4%  
    No. of Shares (m)    63    63  
    Diluted earnings per share* (x)     7.4  
    P/E ratio (x)     8.4  
    (*trailing 12 months)

    What has driven performance during 1QFY10?
    • Sales of the company improved during the quarter on the back of strong demand for packaging from FMCG companies.
      Cost break-up
      As a % of net sales 1QCY09 1QCY10
      Raw material 62.7% 67.7%
      Staff 7.7% 8.2%
      Other expenditure 12.4% 12.4%

    • Operating income fell by 16.2% during the quarter due to higher raw material and staff costs. Raw material costs increased by 5% as a percentage of sales while staff costs increased by 0.5% as a percentage of sales.

    • Net profit margin grew by 4.8% to 12.4% during the quarter. This improvement in margins is due to gain from sale of the company’s Nagpur factory as well as forex gain registered during the quarter.

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