Carrier net profit fall 75% - Views on News from Equitymaster

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Carrier net profit fall 75%

Jul 27, 2001

Carrier Aircon, the air conditioners major, has reported yet another disappointing performance. Net pProfit in the first quarter of the current financial year has fallen by 74.9% to Rs 26 m on the back of a 4.1% drop in sales to Rs 1,450 m.

(Rs m)1QFY011QFY02Change
Sales 1,512 1,450 -4.1%
Other Income 3 24 763.0%
Expenditure 1,363 1,413 3.7%
Operating Profit (EBDIT) 149 37 -75.0%
Operating Profit Margin (%)9.9%2.6% 
Interest 11 12 14.9%
Depreciation 15 19 28.9%
Profit before Tax 127 31 -75.9%
Tax 25 5  
Profit after Tax/(Loss) 102 26 -74.9%
Net profit margin (%)6.7%1.8% 
No. of Shares (eoy) (m) 23.4 23.4  
Diluted number of shares 23.4 23.4  
Earnings per share (Rs)* 17.4 4.4  
(*annualised)   

Since the first quarter i.e. April-June 2001 is the peak season for air conditioner companies, sales tends to be on the higher side. However, Carrier seems to have failed to capitalise on its brand and the entry of multinationals has further alleviated the problems for the company. The margins in the first quarter have fallen drastically to 2.6% in 1QFY02 from 9.9% in the corresponding quarter of the previous year. Though raw material costs have come down by 2.3%, higher other expenses and rise in stock-in-trade have been the core reason behind this sharp fall. The company has changed its accounting policy by including float stock of compressors as stock-in-trade, which were treated as fixed assets.

Meanwhile, Carrier International Mauritius Limited, an indirect subsdiary of Carrier Corporation (USA), has made an open offer to the public to acquire the balance 49% of the paid-up capital of the company.

The scrip is currently trading at Rs 85 at a P/E multiple of 19.4x the annualised 1QFY02 earnings.

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