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Balrampur Chini: Better realisations up ahead - Views on News from Equitymaster
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Balrampur Chini: Better realisations up ahead
Nov 26, 2009

Performance summary
  • Sales for Balrampur Chini Mills Limited (BCML) fell by 9% YoY during 4QFY09. This fall was a result of lower sales witnessed by all the company’s business segments.
  • Operating (EBITDA) margins improved by 2.7% during the quarter to stand at 20%. This improvement was aided by fall in raw material costs.
  • Net profit increased by 193% during the quarter on the back of higher operating income, lower interest costs and lower tax expense.
  • Net profit during FY09 increased by 133% aided by higher operating income and lower tax expense.


Financials
Rs(m) 4QFY08 4QFY09 (%) Change FY08 FY09 (%) Change
Net sales 4,167 3,800 -8.8% 14,756 17,046 15.5%
Expenditure 3,445 3,041 -11.7% 11,482 12,519 9.0%
Operating profit (EBDITA) 723 758 4.9% 3,274 4,527 38.3%
EBDITA margin (%) 17.3% 20.0% 15.1% 22.2% 26.6%  
Other income 3 8   21 17 -19.9%
Interest 283 184 -35.1% 897 969 8.0%
Depreciation 288 270 -6.3% 1,172 1,079 -7.9%
Profit before tax 154 312 102.1% 1,226 2,496 103.5%
Tax 9 (115)   256 231 -9.8%
Profit after tax/(loss) 146 427 193.1% 970 2,265 133.4%
Net profit margin (%) 3.5% 11.2%   6.6% 13.3%  
No. of shares (m) 256 257   256 257  
Diluted earnings per share (Rs)*         8.8  
Price to earnings ratio (x)*         14.9  
* 12 month trailing earnings

What has driven performance in 4QFY09?
  • BCML witnessed a fall in sales this quarter. This fall was due to an overall decline in sales across segments. Sugar which contributes 91% to overall sales fell by 5% during the quarter. The distillery business which contributes 6.4% of total sales fell by 40%. The company also witnessed a fall in its power generation business which contributes 2.3% by 66%.

    Segment wise performance
    Rs (m) 4QFY08 4QFY09 (%) Change FY08 FY09 (%) Change
    Sugar 3,736 3,559 -4.8% 12,306 15,098 22.7%
    % of total revenues 84.5% 91.2%   75.1% 82.6%  
    EBIT % 9.4% 16.5%   5.3% 16.3%  
    Distillery 413 250 -39.5% 1,684 1,312 -22.1%
    % of total revenues 9.3% 6.4%   10.3% 7.2%  
    EBIT % 31.7% 31.3%   38.7% 38.0%  
    Cogeneration 270 91 -66.3% 2,385 1,834 -23.1%
    % of total revenues 6.1% 2.3%   14.5% 10.0%  
    EBIT % 10.6% -87.7%   45.2% 43.8%  
    Organic manure 2 1 -53.3% 15 26 68.4%
    % of total revenues 0.0% 0.0%   0.1% 0.1%  
    EBIT % -360.0% -642.9%   -129.6% -30.1%  
    Total revenues 4,421 3,900 -11.8% 16,390 18,269 11.5%

  • Operating margins for the company increase during the quarter. This was led by a fall in raw material costs by 11% and a fall in other expenditure by 34%. The margins could have been higher but for increase in employee costs which grew by 21% YoY

  • On the EBIT front, margins for sugar improved by 7% to 17%. This improvement comes of the back of higher sugar realisation due to a short fall in sugar cane production. EBIT margins for distillery segment were marginally lower. On the other hand cogeneration segment recorded a loss at EBIT level during the quarter.

  • Bottom line improved during the quarter. This came on the back of lower interest costs which fell by 35% and lower tax expense due to tax provisions from previous years written back.

What to expect?
At a price of Rs.131, the stock is trading at 15 times its 12 month trailing earnings. We shall update our analysis after the conference call with the company tomorrow.

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