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Ballarpur Ind: Subdued performance continues
Sep 20, 2012

Ballarpur Industries (BILT) has announced its results for the fourth quarter and full year FY12. The company has reported a 4.8% YoY growth in sales and 49.2% YoY fall in net profits during 4QFY12. Here is our analysis of the results.

Performance summary
  • Topline grew by 4.8% YoY during 4QFY12. For the full year the same grew by 6.8% YoY.
  • Operating expenses increased by 7.7% YoY during the last quarter and by 10.5% YoY during the full year.
  • The operating profits thus were down by 7.8% YoY due to a smaller rise in topline. For the full year too, the operating profits were down by 8.5% YoY.
  • Operating margins shrank by 2.2% during the quarter and by 2.8% during the year.
  • The rise in depreciation and interest was minimal for the quarter but the consolidated net profits fell by 49.2% on account of a subdued growth in topline and higher operating expenditure. For the FY12, net profits were down by 42.1% YoY.

Financial performance snapshot
(Rs m) 4QFY11 4QFY12 Change FY11 FY12 Change
Net sales 11,920 12,490 4.8% 45,149 48,214 6.8%
Expenditure 9,693 10,435 7.7% 36,394 40,205 10.5%
Operating profit (EBDITA) 2,227 2,054 -7.8% 8,755 8,009 -8.5%
EBDITA margin (%) 18.7% 16.4%   19.4% 16.6%  
Other income - -   - -  
Interest 686 689 0.5% 2,705 2,656 -1.8%
Depreciation & amortisation 902 913 1.2% 3,356 3,640 8.5%
Profit before tax 640 452 -29.3% 2,694 1,713 -36.4%
Profit before tax margin (%) 5.4% 3.6%   6.0% 3.6%  
Exceptional items - -   - -  
Tax (318) (30) -90.6% 38 122 217.4%
Profit after tax before minority 958 482 -49.6% 2,656 1,591 -40.1%
Share of minority 212 104   529 360  
Profit after tax 746 379 -49.2% 2,127 1,231 -42.1%
Net profit margin (%) 6.3% 3.0%   4.7% 2.6%  
No. of shares (m)         655.5  
Diluted earnings per share (Rs)*         1.88  
P/E (x)         9.43  
(*trailing twelve month earnings)

What has driven performance in 4QFY12?
  • Topline grew by 4.8% YoY during 4QFY12. For the full year the same grew by 6.8% YoY. This was largely led by 37.6% YoY growth in paper products and office supplies segment followed by 18.1% YoY growth in others. Paper segment grew moderately by 5.2% YoY, however pulp revenues witnessed a fall of 27.3% YoY during the quarter.

  • Higher expenses on power, fuel and water which were up by 34.2% YoY during the quarter resulted in higher operating costs for BILT. Operating expenses increased by 7.7% YoY during the last quarter and by 10.5% YoY during the full year.

  • The operating profits thus were down by 7.8% YoY due to a smaller rise in topline. For the full year too, the operating profits were down by 8.5% YoY.

  • Operating margins shrank by 2.2% during the quarter and by 2.8% during the year.

  • The rise in depreciation and interest was minimal for the quarter but the consolidated net profits fell by 49.2% on account of a subdued growth in topline and higher operating expenditure. For the FY12, net profits were down by 42.1% YoY.

  • The tax amount is net of MAT entitlement credit of the Company's subsidiary BILT Graphic Paper Products Limited.

    Segmental revenue snapshot
      4QFY11 4QFY12 Change FY11 FY12 Change
    Paper 9,104 9,579 5.2% 35,074 37,373 6.6%
    PBIT margin (%) 7.9% 8.6%   10.3% 8.2%  
    Paper products & office supplies 931.4 1,282 37.6% 4202.3 4,424 5.3%
    PBIT margin (%) 7.0% 4.0%   7.0% 4.4%  
    Pulp 1621 1179 -27.3% 4949 4834 -2.3%
    PBIT margin (%) 35.2% 24.8%   32.7% 24.9%  
    Others 245 290 18.1% 907 1147 26.5%
    PBIT margin (%) -4.0% -4.0%   -4.0% -4.0%  
    Total 11,902 12,329 3.6% 45,132 47,779 5.9%
    PBIT margin (%) 11.3% 9.3%   12.2% 9.2%  

What to expect?
BILT is near the completing of its huge expansion plan whereby it has expanded its capacities in both paper and pulp segments. The company's Sabah facility got commissioned in June and is now supplying pulp to the company. Earlier, the company was facing pulp supply problems when its paper capacity had increased but pulp production had not increased in line. With the commissioning of Sabah pulp mill in June and /Ballarpur pulp mill by October, the company expects to fulfill its pulp demand internally itself. Thereby it will not have to rely much on external purchases of the same. With this the operating profit margins may improve in the future. Also, company does not have any fresh capex plans for next couple of years which could affect the profit margins. With its entry into the tissue business, BILT wants to build its brand more which will help the company's consumer oriented business segments like stationery etc. At the current price of Rs 17.7, the stock is trading at a price to earnings multiple of 9.4 times its trailing twelve month earnings. We maintain our negative view on the stock.

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