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  • Nov 22, 2011 - Ballarpur Ind: Higher operating expenditure hurt profits

Ballarpur Ind: Higher operating expenditure hurt profits
Nov 22, 2011

Ballarpur Ind has announced its results for the first quarter of FY12. The company has reported a 8.7% YoY growth in sales and 38% YoY fall in net profits during 1QFY12. Here is our analysis of the results.

Performance summary
  • Topline grew by 8.7% YoY during the quarter.
  • Operating margins fell by 2% over the same quarter last year.
  • Higher depreciation charges and operating expenditure led to a 38% fall in net profits. Net margins were down by 1.7% as compared to the same quarter in previous year.

Financial performance snapshot
(Rs m) 1QFY11 1QFY12 Change
Net sales 10,227 11,114 8.7%
Expenditure 8,138 9,067 11.4%
Operating profit (EBDITA) 2,090 2,047 -2.0%
EBDITA margin (%) 20.4% 18.4%  
Other income - -  
Interest 710 731 3.1%
Depreciation & amortisation 794 890 12.1%
Profit before tax 586 426 -27.4%
Profit before tax margin (%) 5.7% 3.8%  
Exceptional items - -  
Tax 83 75 -10.0%
Profit after tax before minority 503 351 -30.3%
Share of minority 94 97  
Profit after tax  410 254 -38.0%
Net profit margin (%) 4.0% 2.3%  
No. of shares (m)   655.5  
Diluted earnings per share (Rs)*   3.0  
P/E (x)   8.6  
* On a trailing 12 months basis

What has driven performance in 1QFY12?
  • Topline grew by 8.7% YoY during the quarter. Paper segment grew by 11.5% YoY, pulp business revenues were up by 17% YoY but paper products and office supplies registered a de growth of 22.7% YoY.

  • Fuel charges went up by more than 37% leading to a fall in operating profits of 2%. Operating margins fell by 2% over the same quarter last year.

  • Despite higher interest rate scenario, company was able to contain its interest expenses that were marginally up by 3%.

    Segmental snapshot
      1QFY11 1QFY12 Change
    Paper 7,907 8,820 11.5%
    PBIT margin (%) 12.7% 9.3%  
    Paper products & office supplies 1183.9 915 -22.7%
    PBIT margin (%) 7.0% 6.0%  
    Pulp 901 1052 16.8%
    PBIT margin (%) 27.3% 29.5%  
    Others 259 313 20.7%
    PBIT margin (%) -4.0% -4.0%  
    Total 10,251 11,100 8.3%
    PBIT margin (%) 12.9% 10.6%  

  • PBIT margins have shrunk for all businesses except Pulp segment that witnessed expansion of margins by 2.2%.

  • Higher depreciation charges and operating expenditure led to a 38% fall in net profits. Net margins were down by 1.7% as compared to the same quarter in previous year.

  • It may be noted here that BILT had acquired 100% stake in Premier Tissues India Ltd thereby making it a wholly owned subsidiary. As such, the numbers for this quarter and the same quarter of previous year are not exactly comparable.

What to expect?
At the current price of Rs 26, the stock is trading at a price to earnings multiple of 8.6 times trailing twelve month earnings. The company is in an expansionary mode and has recently acquired renowned paper tissue manufacturer ‘Premier Tissues’. With this, the company expects to diversify its risk and gain maximum advantage of the growing demand for paper tissues in India. We are in the process of reviewing our estimates taking into account the impact of the new business on overall revenue growth. We shall soon put up our updated view.

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