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Tisco disappoints - Views on News from Equitymaster
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  • Jul 18, 2001

    Tisco disappoints

    Tisco has reported 7% drop in topline for the quarter ended June 2001. The company's profits before tax too declined by 59% thanks to drop in operating margins, higher depreciation and interest cost.

    (Rs m) 1QFY01 1QFY02 Change
    Gross Sales 17,283 16,114 -6.8%
    Other Income 155 59 -62.0%
    Expenditure 13,705 13,015 -5.0%
    Operating Profit (EBDIT) 3,578 3,099 -13.4%
    Operating Profit Margin (%) 20.7% 19.2%  
    Interest 1,031 1,146 11.1%
    Depreciation 1,122 1,356 20.9%
    Profit before Tax 1,580 656 -58.5%
    Other Adjustments 475 448 -5.8%
    Tax 91 3 -97.0%
    Profit after Tax/(Loss) 1,014 205 -79.8%
    Net profit margin (%) 5.9% 1.3%  
    No. of Shares (eoy) (m) 368.4 368.4  
    Diluted Earnings per share* 11.0 2.2  
    P/E (at current price)      

    The company's topline took a hit due to a downturn in the economic and industrial activity. Exports of Tisco also declined due to trade action take by the US (major export market for the Indian steel) against Indian steel exports.

    The decline in operating margins of the company by about 150 basis points was a result of fall in realizations. Excess capacity in the long products in the world markets depressed the prices in the international markets. This has resulted in the lower flat product prices in the domestic markets compared to 1QFY01.

    With the commencement of second galvanizing line of cold rolling mill, the company's depreciation and interest cost increased by 11% and 21% respectively (this cost was capitalized by the company earlier).

    During the quarter, Tisco charged Rs 563 m as VRS cost (included in other adjustments). The company also made gains of Rs 116 m on sale of long term investments. While saving in VRS will help the company to reduce employee cost, increase in raw material prices will offset the benefits.

    At the current market price of Rs 100, Tisco is trading at a P/E multiple of 14x. Considering the weakness in the industrial activity witnessed in the recent months and grim scenario in the world markets, Tisco is likely to face tough times going forward.



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