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Crompton Greaves: Dire straits

May 23, 2001

Crompton Greaves Limited (CGL), India`s largest private sector electrical equipment manufacturer continued its dismal run in FY01. The company however, has almost halved its net loss to Rs 732 m as compared to a loss of Rs 1,466 m posted in FY00.

(Rs m)4QFY004QFY01ChangeFY00FY01Change
Net sales6,5955,120-22.4%16,74613,783-17.7%
Other Income7518-75.8%1601,028543.0%
Expenditure6,3734,698-26.3%16,65514,485-13.0%
Operating Profit (EBDIT)22242290.0% 91 -702-870.5%
Operating Profit Margin (%)3.4%8.2%0.5%-5.1%
Interest 380177-53.4%1,127871-22.7%
Depreciation187127-32.2%587473-19.4%
Profit before Tax-269137- (1,463) (1,018)-
Tax330.0%330.0%
Extraordinary income---289
Profit after Tax/(Loss) (272)134- (1,466) (732)-
Net profit margin (%)-4.1%2.6%-8.8%-5.3%
No. of Shares (eoy) (m)52.452.452.452.4
Earnings per share* (5.2)2.6 (28.0) (14.0)
*(annualised)

Though the company's turnover declined by 18%, its expenditure declined at a slower 13%. This resulted in an operating loss of Rs 702 m for CGL. A huge jump in other income has contributed to the lower losses reported by the company. An extraordinary income of Rs 289 m also helped Crompton prune its losses. On the expenditure side, a decline in both interest and depreciation also aided the company.

If we take out the effect of the other income and the extraordinary income from both FY00 and FY01, then Crompton Greaves net operating loss has actually gone up from Rs 1.6 bn in FY00 to Rs 2 bn in FY01.

The company's turnover declined by 22% in the 4QFY01. But since its expenditure declined at a faster clip the company's operating margins improved by a significant 480 basis points. A 53% decline in interest costs and a 32% decline in depreciation provisioning helped the company post a net profit of Rs 134 m.

The company has not declared a dividend in view of its negative performance. It did the same last year too.

Though the company has shown signs of improvement by cutting costs and pruning losses, it is very early to say whether the company is headed for a turnaround. The economic activity is still sluggish and it may be some time before Crompton can find its feet.

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