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DB Corp: Operating costs dent profit
Oct 31, 2011

DB Corp announced the second quarter results of financial year 2011-2012 (2QFY12) .The company has reported a 17.6% YoY and 37.1% YoY increase in top line and fall in net profits respectively. Here is our analysis of the results.

Performance summary
  • Top line increased by 17.6% YoY on back of strong growth of 16% in advertising. For the half year ended period, topline grew by 18% YoY.
  • Operating margins fell by a drastic almost 10% during the quarter. Similar decline was witnessed in the half year period ended September as well.
  • Net profits fell by 37.1% YoY during the quarter and by 25.3% during the 6 month ended September 2011.

Financial performance snapshot
(Rs m) 2QFY11 2QFY12 Change 1HFY11 1HFY12 Change
Net sales 3,010 3,539 17.6% 5,997 7,077 18.0%
Expenditure 2,059 2,768 34.4% 3,909 5,302 35.6%
Operating profit (EBDITA) 951 771 -18.9% 2,087 1,775 -15.0%
EBDITA margin (%) 31.6% 21.8%   34.8% 25.1%  
Other income 32 20 -38.9% 75 56 -25.5%
Interest 38 67 77.7% 85 94 10.8%
Depreciation & amortisation 107 124 15.7% 211 241 14.1%
Profit before tax 839 600 -28.4% 1,867 1,496 -19.9%
Profit before tax margin (%) 27.9% 17.0%   31.1% 21.1%  
Exceptional items - -   - -  
Tax 199 197 -0.7% 510 482 -5.5%
Profit after tax before minority 640 403 -37.1% 1,357 1,014 -25.3%
Share of minority 0 0   1 1  
Profit after tax 640 403 -37.1% 1,357 1,013 -25.3%
Net profit margin (%) 21.3% 11.4%   22.6% 14.3%  
No. of shares (m)         183.29  
Diluted earnings per share (Rs)*         12.1  
P/E (x)         18.1  
(*trailing twelve month earnings)

What has driven performance in 2QFY12?
  • Topline rose by 17.6% in 2QFY12 over the corresponding quarter last year led by 16% growth in advertising revenue. For the half year revenues grew by 18%. Circulation revenue was up by nearly 13% during the quarter.

  • Launch expenses of newer markets coupled with higher newsprint costs resulted in total operating expenditure growing by a staggering 34%. Raw material as a percentage of sales increased from 30% to 35% over the past 12 months.

  • Operating profits thus fell down by almost 19% in 2QFY12 with operating margins falling by 10% to 22%. For the 6 month ended period, operating profits were down by 15%.
  • Cost break-up
    (% of sales) 2QFY11 2QFY12 Change 1HFY11 1HFY12 Change
    Raw materials consumed 901 1,245 38.2% 1,732 2,428 40.2%
    % sales 29.9% 35.2%   28.9% 34.3%  
    Staff cost 459 613 33.7% 869 1,188 36.7%
    % sales 15.2% 17.3%   14.5% 16.8%  
    Selling and Distribution expenses 157 219 39.0% 272 392 44.5%
    % sales 5.2% 6.2%   4.5% 5.5%  
    Other expenses 542 691 27.5% 1,036 1,293 24.7%
    % sales 18.0% 19.5% 17.3% 18.3%  
    Total expenditure 2,059 2,768   3,909 5,302  

  • Higher interest costs (up by 78%) and lower other income (down by 40%) resulted in a fall of 37.1% in net profits during the second quarter. For the half year, profits were down 25% as compared to corresponding period last year..

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