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Rallis India: Bottomline focus evident - Views on News from Equitymaster
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Rallis India: Bottomline focus evident
Aug 13, 2009

Performance summary
  • The standalone topline of the company declines by 5% YoY mainly on account of continued focus on restructuring of product portfolio.
  • The operating profits grow by 15.5% YoY as operating expenses decline more than topline, thus EBITDA margins expands by 2.1%.
  • PBT (excluding the exceptional item) grows by 31.4% YoY led by decline in interest costs coupled with improvement at operating levels
  • Net profits jumps more than two times as decline in exceptional items lend further support to improved operating performance.

Standalone financial snapshot
(Rs m) 1QFY09 1QFY10 Change
Net sales 1,752 1,665 -5.0%
Expenditure 1,582 1,469 -7.2%
Operating profit (EBDITA) 170 196 15.5%
EBDITA margin (%) 9.7% 11.8%  
Other income 8 11 39.0%
Interest (net) 9 2 -73.3%
Depreciation 40 36 -11.4%
Profit before tax 129 169 31.4%
Extraordinary inc/(exp) (60) (20) -66.7%
Tax 27 55 106.4%
Profit after tax/(loss) 42 94 122.7%
Net profit margin (%) 2.4% 5.7%  
No. of shares (m) 11.98 11.98  
Diluted earnings per share (Rs)*   63.8  
Price to earnings ratio (x)**   12.5  
* annualised, ** on trailing twelve months earnings

What has driven performance in 1QFY10?
  • The standalone topline of the company declined by 5% YoY during the quarter. This can be attributed mainly to company’s continued focus on the restructuring of the product portfolio wherein it is phasing out non-profitable as well as less profitable products. In fact, as per the management, the company, since last few years has been losing out a turnover of 7% to 8% in order to focus on profitability. Further, agro chemical is a seasonal business, thus usually the first quarter numbers are lower as compared to the remaining period.

  • The operating profits grew by 15.5% YoY, despite the decline in the topline. This is mainly on account of greater than proportionate decline in the operating costs as compared to topline. The operating costs declined by 7.2% YoY during the quarter. Raw materials, staff costs and other expenditure (as % of sales) declined, while purchase of traded goods ( as % of sales) grew during the quarter.

    Cost breakup table
    (Rs m) 1QFY09 1QFY10 Change
    Raw materials 853 762 -10.7%
    % sales 48.7% 45.8%  
    Staff cost 198 178 -10.0%
    % sales 11.3% 10.7%  
    Other expenditure 356 280 -21.5%
    % sales 20.3% 16.8%  
    Purchase of traded goods 175 249 42.7%
    % sales 10.0% 15.0%  

  • Net profits grew by 122.7% YoY during the quarter mainly on account of exceptional item. However, excluding the same net profits grew by 11.8% YoY during the quarter. At the PBT level, PBT (excluding the exceptional item) grew by 31.4% YoY led by decline in interest costs coupled with expansion at operating level.

What to expect?
Rallis India plans to launch few new products during the current fiscal and expects them to add substantially to the growth. The management plans to continue to focus on the profitability and will concentrate on bottomline growth rather than volumes. Rallis India has implemented programme ‘DISHA’ for same, which is poised to enhance the enterprise value of the company. It is setting up a new plant at Dahej in Gujarat with an investment of around Rs 1.5 bn as well as it is also expanding its capacity at the existing plant in Ankleshwar in next twelve months.

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