The dismal scenario in the sugar sector continues to affect EID Parry. On a standalone basis, lower realisations and higher costs lead to losses both at the operating and net level.
On a consolidated basis, the topline has grown by 111% YoY, while bottomline falls by 22% YoY.
Rs(m) | 2QFY07 | 2QFY08 | (%) Change | 1HFY07 | 1HFY08 | (%) Change |
Gross sales | 1,716 | 1,700 | -1.0% | 3,478 | 2,494 | -28.3% |
Excise duty | 104 | 84 | -18.7% | 173 | 146 | -15.3% |
Net sales | 1,613 | 1,615 | 0.2% | 3,305 | 2,348 | -29.0% |
Expenditure | 1,414 | 1,818 | 28.6% | 2,876 | 2,761 | -4.0% |
Operating profit (EBDITA) | 199 | (203) | 429 | (413) | ||
EBDITA margin (%) | 12.3% | 13.0% | ||||
Other income | 202 | 281 | 38.9% | 257 | 350 | 36.4% |
Interest | -2 | 25 | -1 | 29 | ||
Depreciation | 90 | 109 | 21.5% | 162 | 216 | 33.3% |
Profit before tax | 313 | (56) | 525 | (308) | ||
Extraordinary item | - | - | 1,181 | - | ||
Tax | 42 | 1 | -96.7% | 354 | 3 | -99.1% |
Profit after tax/(loss) | 271 | (57) | 1,352 | (312) | ||
Net profit margin (%) | 16.8% | 40.9% | ||||
No. of shares (m) | 89.3 | 89.3 | 89.3 | 89.3 |
(Rs m) | 2QFY07 | 2QFY08 | (%) Change | 1HFY07 | 1HFY08 | (%) Change |
Sugar | 1,675 | 1,744 | 4.1% | 3,464 | 2,545 | -26.5% |
PBIT margin (%) | 8.5% | -11.8% | 11.0% | -17.5% | ||
% of revenue | 95.7% | 94.7% | 97.2% | 93.6% | ||
Bio products | 76 | 98 | 29.5% | 99 | 174 | 75.8% |
PBIT margin (%) | 2.6% | 13.1% | -16.9% | 5.8% | ||
% of revenue | 4.3% | 5.3% | 2.8% | 6.4% | ||
Total revenues | 1,751 | 1,842 | 5.2% | 3,563 | 2,719 | -23.7% |
On a consolidated basis, the net sales were up 111% YoY for 2QFY08. The growth was mainly driven by 137% YoY growth in the farm input segment. The standalone sales contributed 8% to the total sales, down from 17% in 2QFY07.
Rs(m) | 2QFY07 | 2QFY08 | (%) Change | 1HFY07 | 1HFY08 | (%) Change |
Gross sales | 9,744 | 20,263 | 107.9% | 15,711 | 25,868 | 64.6% |
Excise duty | 273.7 | 265 | -3.3% | 441.7 | 445 | 0.7% |
Net sales | 9,470 | 19,998 | 111.2% | 15,269 | 25,423 | 66.5% |
Expenditure | 8,306 | 18,344 | 120.9% | 13,467 | 23,196 | 72.2% |
Operating profit (EBDITA) | 1,164 | 1,654 | 42.0% | 1,802 | 2,227 | 23.6% |
EBDITA margin (%) | 12.3% | 8.3% | 11.8% | 8.8% | ||
Other income | 95 | 151 | 60.0% | 192 | 253 | 32.3% |
Interest | 69 | 183 | 163.6% | 151 | 405 | 167.8% |
Depreciation | 201 | 207 | 3.3% | 377 | 451 | 19.7% |
Profit before tax | 989 | 1,415 | 43.1% | 1,466 | 1,624 | 10.8% |
Extraordinary item | - | - | 1,181 | - | ||
Tax | 352 | 575 | 63.7% | 775 | 770 | -0.6% |
Profit after tax/(loss) | 637 | 840 | 31.7% | 1,872 | 854 | -54.4% |
Share of profit/(loss) from associates | 114 | - | 132 | - | ||
Less: Minority interest | 188 | 401 | 113.0% | 229 | 513 | 124.2% |
Net profit | 564 | 439 | -22.1% | 1,775 | 341 | -80.8% |
Net profit margin (%) | 6.0% | 2.2% | 11.6% | 1.3% |
Downturn continues: Increase in the operating expenses at a faster rate than the topline led the company to yet again report an operating loss for 2QFY08 on a standalone basis. Losses have been further accentuated with the prevailing selling price of sugar being lower than the cost of production. Even on a consolidated basis, the margins have declined by 4% YoY.
As a % of net sales | 2QFY07 | 2QFY08 | 1HFY07 | 1HFY08 |
Total Cost of goods | 63.6% | 85.4% | 64.0% | 76.6% |
Staff Cost | 5.7% | 6.8% | 5.5% | 9.4% |
Other Expenditure | 18.3% | 20.3% | 17.5% | 31.7% |
On a segmental basis, the sugar segment continues to post losses on account of lower realization from sugar and an increase in sugarcane prices. However, the cogeneration and distillery segments provided some saving grace to the overall performance by reporting profits of Rs 96.7 m and Rs 34.1 m respectively. The bio pesticides segment witnessed improved performance with margins touching 13.1% in 2QFY08 from 2.6% in 2QFY07.
Further losses: Loss at the operating level coupled with higher depreciation charges has also dragged the bottomline into the red on a standalone basis. Having said that, higher other income and considerably lower tax expenses have cushioned the blow to a large extent. On a consolidated basis, the profits down 22% YoY led by lower operating income and higher interest costs. Higher other income provided some relief though.
The Board of Directors have approved, subject to the approval of the shareholders, the proposal to buy-back the fully paid up equity shares of Rs.2 each of the company from the shareholders at a maximum price of Rs 160 per equity share. However, we believe that given the company’s strong investment portfolio and efforts at reducing its dependence on the sugar business, it might well turn out to be a good long-term bet. Thus, while risks are definitely on the lower side, the high level of uncertainty makes it a high risk, high reward proposition.