Havells: Strong on a standalone basis

Aug 11, 2009

• Havells’ standalone topline grew by 6.5% YoY during the quarter. This can be attributed to growth across the entire business segment except for cables & wires division. Switchgears revenues grew by 16.8% YoY which included additional sales of Rs 80 m from motor division in 1QFY10 as compared to nil during the corresponding period last year. Lightning and Fixtures sales grew by 20.5% YoY led by increased sales of luminaries as well as CFL. Electrical consumer durables (ECD) revenues grew by 16.8% YoY on the back of growth in the branded consumer product portfolio. However, cables & wires’ sales declined by 4% YoY despite the robust volumes growth. This was mainly due to fall in commodities prices especially aluminium and copper which resulted in lower realisations.
  Segmental breakup

  (Rs m)	1QFY09	1QFY10	Change
  Switchgears
  Revenues	1,471	1,719	16.8%
  PBIT margins	38.3%	35.4%
  Cable & Wires
  Revenues	2,529	2,428	-4.0%
  PBIT margins	10.6%	12.1%
  Lighting & Fixtures
  Revenues	627	755	20.5%
  PBIT margins	17.5%	15.8%
  Electrical Consumer Durables
  Revenues	774	904	16.8%
  PBIT margins	20.8%	24.0%

  
  
• On the operating front, operating profits grew by 31.7% YoY mainly on account of lower operating costs during the quarter. Raw material and staff costs (as % sales) declined during the quarter. Thus, operating margins improved by 2.4% to 12.3% in 1QFY10. PBIT margins of cables & wires division grew from 10.6% to 12.1% during the quarter led by effective price management despite the falling material cost environment, while PBIT margins of ECD segment grew from 20.8% to 24% during the same period owing to better realisations and reduced raw material costs. However, PBIT margins of Switchgear segment declined by 2.9% YoY to 35.4% mainly due to addition of new division i.e. motor division during the quarter, while the same for Lightning and Fixtures segment declined by 1.7% YoY to 15.8% owing to increase in import costs of luminaries due to the appreciation of Rupee during the quarter.
  Cost break-up…

  (Rs m)	1QFY09	1QFY10	Change
  Raw materials	2,900	2,908	0.3%
  % sales	52.3%	49.3%
  Purchase of traded goods	331	450	35.8%
  % sales	6.0%	7.6%
  Staff cost	222	191	-13.6%
  % sales	4.0%	3.2%
  Other Expenditure	1,538	1,625	5.7%
  % sales	27.8%	27.6%

  
  
• Net profits grew by 20.9% YoY pointing towards the significant performance at the operating levels. However, higher depreciation costs and tax outgo during the quarter has adversely impacted the bottomline growth. The company managed to reduce its interest costs due to efficient working capital management that led to lower utilization of credit facilities. Thus, impacting the net profits positively during the quarter.

What to expect?