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Snowcem's sales up 52% but margins decline - Views on News from Equitymaster
 
 
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  • Aug 2, 2000

    Snowcem's sales up 52% but margins decline

    Snowcem India Limited has recorded a 52% increase in sales from Rs 225 m in 1QFY00 to Rs 343 m in 1QFY01. However, the realisations have come under extreme pressure, thus dropping by 5% from 24% in 1QFY00 to 19% in 1QFY01. The company is facing severe competition in the distemper segment from the Asian Paints "Apex" brand. This along with a 50% rise in the raw material costs have resulted in margins declining drastically. The interest cost has also gone up by almost 50%.

    (Rs m) 1QFY00 1QFY01 Change
    Sales 225 343 52.2%
    Other Income 0.9 0.9 7.2%
    Expenditure 171 278 62.2%
    Operating Profit (EBDIT) 54 65 20.1%
    Operating Profit Margin (%) 23.9% 18.9%  
    Interest 18 27 49.3%
    Depreciation 4 4 -0.6%
    Profit before Tax 32 34 5.9%
    Other Adjustments - -  
    Tax - -  
    Profit after Tax/(Loss) 32 34 5.9%
    Net profit margin (%) 14.3% 9.9%  
    No. of Shares (eoy) (m) 10.5 10.5  
    Diluted number of shares 10.5 10.5  
    Diluted Earnings per share* 12.2 12.9  
    *(annualised)      

    The company has picked up a 50% stake in Brown & Co, a Sri Lankan based paint company. Snowcem would be providing technical assistance for the manufacture of the company's products in Sri Lanka in the company's brand, which would be marketed in Sri Lanka and SAARC nations. Besides, the company would also be exporting raw materials to Sri Lanka. This move is expected to add Rs 100 m to Rs 200 m to the revenues of Snowcem India Limited. But even here, the company would be facing stiff competition from Delmege Forsyth Paints, the company recently acquired by Asian Paints (International) Limited and supposedly with a good market share in Sri Lanka.

    The stock is currently trading at Rs 64 at a P/E multiple of 4.9x on the annualised first quarter FY01 earnings.

     

     

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