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TCPL Packaging Ltd: Tough Quarter, Multiple Trigger Ahead! - Views on News from Equitymaster
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  • Aug 28, 2017 - TCPL Packaging Ltd: Tough Quarter, Multiple Trigger Ahead!

TCPL Packaging Ltd: Tough Quarter, Multiple Trigger Ahead!
Aug 28, 2017

TCPL Packaging Limited has announced its financial results for the first quarter of the financial year 2017-18 (1QFY18). During the quarter, revenues were down by 2.1% YoY and net profits were down by 62% YoY.

Performance summary
  • For 1QFY18, revenues were down by 2.1% YoY. De-growth in revenues was largely on the back of transition to the Goods and Service Tax. In the month of May and June all the major customers of the company (FMCG players) went for de-stocking their inventory and completely stopped deliveries from suppliers including TCPL.
  • The operating profits were down by 13.4% YoY. This was due to increase in the employee cost (29.9% YoY). The employee cost was higher on the back of the employees hired for the new flexible plant (there were no sales for the corresponding employee expenses).
  • Owing to the de-stocking by company's key clients, the company was not able to ramp up the capacity of the new plant, whereas it continued to incur cost for the plant. Hence, the operating margins saw some pressure at 14.3% against 16.2% in corresponding quarter last year.
  • The delay in the commissioning of the flexible packaging plant due to de-stocking led to negative operating leverage and hit the bottom line. Net profits were down by 62% YoY.
  • The pressure on the net profits and margins was largely due to high interest and depreciation cost from the new plant which was not running due to supply cut by the clients on the account of de-stocking.
  • Standalone Financial Performance
    (Rs m) 1QFY17 1QFY18 Change
    Net sales 1,458 1,427 -2.1%
    Expenditure 1,222 1,223 0.0%
    Operating profit (EBDITA) 236 204 -13.4%
    EBDITA margin (%) 16.2% 14.3%  
    Depreciation 66 91 38.4%
    Interest 52 67 29.7%
    Profit before tax 118 45 -61.5%
    Tax 41 16 -60.3%
    Profit after tax / (loss) 76 29 -62.1%
    Net profit margin (%) 5% 2%  
    No. of shares (m)   9  
    Diluted earnings per share (Rs)   33  
    Price to earnings ratio (x)*   19  

    (Trailing twelve-month earnings)

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