Carrier: Dismal performance continues - Views on News from Equitymaster

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Carrier: Dismal performance continues

Jun 27, 2001

Carrier Aircon, the air conditioners major, has registered a 21% rise in sales to Rs 3,799 m in FY01. But a closer look reveals that the increase in topline in primarily on account of a lower topline growth in FY00 due to fire in one of its manufacturing units in the first quarter of FY00.

(Rs m)FY00FY01Change
Sales 3,140 3,799 21.0%
Other Income 63 66 4.0%
Expenditure 2,967 3,667 23.6%
Operating Profit (EBDIT) 173 132 -23.7%
Operating Profit Margin (%)5.5%3.5%
Interest 24 52 116.7%
Depreciation 55 71 29.1%
Profit before Tax 157 75 -52.5%
Extraordinary item (25) -
Tax 40 12 -70.0%
Profit after Tax/(Loss) 92 63 -32.1%
Net profit margin (%)2.9%1.6%
No. of Shares (eoy) (m) 23.4 23.4
Diluted number of shares 23.4 23.4
Earnings per share (Rs) 3.9 2.7

If one were to compare the sales growth with the performance of the company in FY99, topline has grown by around 6%. The company's performance at the operating level is also rather dissappointing. In FY00, Carrier reported a operating margin of 5.5% in FY00 as compared to 11.5% in FY99. This year, despite the absence of any extraordinary losses, margins have further declined to 3.5% compared to 5.5% in FY00. One of the key reasons is the 13.9% rise in raw material costs to Rs 1,839 m. Staff and wage costs have also gone up by 10.4% to Rs 319 m. Though the slow down in the economy and competition might have affected demand, the operating margins of the company are one fourth of the industry average.

Net profit for FY01 stands at Rs 63 m, which has declined by 32.1% in FY01. If one were to exclude the extraordinary loss in FY00, net profit has actually declined by 46.6%.

Carrier International Mauritius Limited, an indirect subsidiary of Carrier Corporation, has made an open offer to the public to acquire the balance 49% of the paid up equity shares of the company. Carrier now reportedly, holds around 80% stake in the Indian subsidiary.

The scrip is currently trading at Rs 98 at a P/E mutliple of 36.6x the FY01 earnings. The company has recommended a dividend of Rs 2.2 per share, which workd out to a dividend yield of 2.2% .

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