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Gujarat Ambuja: Deferred taxes take a toll - Views on News from Equitymaster
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  • Aug 2, 2002

    Gujarat Ambuja: Deferred taxes take a toll

    Gujarat Ambuja, the cement major, prima facie, has announced poor results considering the company has reported a 1% rise in net profits. But a closer look will reveal that profits have actually gone up by 17% on a YoY basis if adjusted for deferred tax. The company has also reported a 9% growth in total revenues.

    (Rs m) 4QFY01 4QFY02 Change FY01 FY02 Change
    Net Sales 4,301 4,134 -3.9% 14,479 15,830 9.3%
    Other Income 41 30 -26.1% 147 216 47.1%
    Expenditure 2,948 3,063 3.9% 9,985 11,388 14.0%
    Operating Profit (EBDIT) 1,353 1,071 -20.8% 4,493 4,442 -1.1%
    Operating Profit Margin (%) 31.5% 25.9%   31.0% 28.1%  
    Interest 309 240 -22.2% 1,341 966 -27.9%
    Depreciation 310 368 18.8% 1,293 1,378 6.6%
    Profit before Tax 776 493 -36.4% 2,006 2,313 15.3%
    Extraordinary items 0 0     0 0
    Tax (73) (86) 18.6% (165) (448) -
    Profit after Tax/(Loss) 703 407 -42.1% 1,841 1,865 1.3%
    Net profit margin (%) 16.3% 9.9%   12.7% 11.8%  
    No. of Shares 147.0 147.0   147.0 147.0  
    Diluted Earnings per share* 19.1 11.1   12.5 12.7  
    P/E Ratio   15.1     13.2  
    (* annualised)            

    The company had a poor fourth quarter in FY02. The Company has reported a 3% drop in its topline while net profits have eroded by 42%. The poor results are a result of a 4% rise in total expenditure and a 19% increase in its depreciation expenses. The commisioning of a new plant in Chandrapur, Maharashtra has led to higher depreciation. The topline in the fourth quarter has seen a degrowth mainly on account of a 7% drop in realisations.

    For full year FY02, sales volume of the company has grown by 18%. Domestic sales of the company has risen by 13% while its export volumes have gone up by 42% . The total expenditure has gone up by 14% mainly on account of a 42% growth in its raw material costs. Inspite of a fall in realisation the company has been able to limit the fall in operating margins by way of higher operational efficiencies.The company has been able to further reduce its power, fuel and freight costs.

    GACL has been able to reduce its interest costs by a considerable 28% mainly by refinancing more expensive debt. The depreciation expenses of the company has gone up by 6.6% mainly on account of commissioning of the new Chandrapur plant. On a like to like basis, excluding the provision for deferred tax, the company has reported a 17% growth in net profits.

    GACL has announced the merger of Ambuja Cement Rajasthan Limited with itself as a measure to turnaround the ailing subsidiary. The company has also performed well in the month of July '02, posting a 69% increase in volumes, but it must be kept in mind that this growth has been on a smaller base and also the fact that new capacity at Chandrapur is likely to have contributed heavily to these volumes.

    The stock is currently trading at a price of Rs 167 a P/E multiple of 13x its annual FY02 earnings. FY02 had been a good year for the company as far as cement volumes are concerned. In the current year, also the company is likely to maintain healthy volumes. Realisations, however, are going to be affected on account of overcapacity. Having said that, GACL has sufficiently highlighted that it is still able to command better realisations compared to its peers.

    Going forward, in the short term, the company is likely to have a healthy topline growth. The bottomline will continue to remain under pressure due to poor realisations. In the long term, however the company will benefit the most as and when the demand and supply mismatch is rectified, which will significantly boost topline as well as bottomline.



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    Aug 18, 2017 (Close)


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