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Aditya Birla Nuvo posts satisfactory Q2 FY 2007- 2008 results

31st October, 2007

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Q2 FY08
Consolidated revenues Rs. 3000.5 crore
Net profit Rs. 47.8 crore

Particulars
Consolidated results
Rs. crore Quarter ended 30 September Half year ended 30 September
2007
2006
Growth per cent
2007
2006
Growth per cent
Net income from operations
3,000.5
2,092.1
43
5,321.3
3,397.8
57
Operating profit (PBDIT)
294.4
305.0
-3
601.5
526.2
14
Net profit (after minority interest)
47.8
76.7
-38
142.5
143.4
-1
EPS (Rs.)
5.1
8.5
-40
15.3
16.0
-5

Aditya Birla Nuvo has posted satisfactory performance for the second quarter ended 30 September 2007

Continued growth in consolidated revenues
The company's consolidated revenues at Rs. 3,000.5 crore are up by 43 per cent from Rs. 2,092.1 crore achieved during the corresponding quarter of FY 2007. Revenues from its subsidiaries and joint ventures, where the company has made substantial investments in the past, saw a rise of 74 per cent to Rs. 2082.8 crore from Rs. 1,195.6 crore.

The focus during the quarter was:

  1.  accelerating growth in the telecom business
  2.  regaining market share in the life insurance business
  3. building capacities in the BPO business towards profitable growth 
  4. expanding manufacturing capacities in value businesses

All the businesses are on a growth trajectory.

  • The telecom business registered a 55 per cent rise in revenues at Rs. 1562.2 crore vis-a-vis Rs. 1009.9 crore with a subscriber base of 18.67 million as on 30 September 2007, growing at a higher clip than the industry
  • The life insurance business has shown a spectacular growth of 110 per cent in revenues at Rs. 1078.2 crore vis-a-vis Rs. 512.9 crore driven by the excellent response to its new product Birla Sunlife Gold Plus. As a result, it stepped up to fifth rank with 6.5 per cent market share amongst private players
  • In the BPO business, revenues soared by 82 per cent to Rs. 393.7 crore from Rs. 216 crore. Three new centres were launched during the quarter.

The stand-alone revenues rose to Rs. 917.7 crore from Rs. 896.5 crore despite the plant breakdown in fertilisers business for 27 days. Two of the value businesses viz., rayon and insulators achieved the highest ever quarterly revenues. In the insulators business, revenues more than doubled after the merger of the manufacturing subsidiary with Nuvo w.e.f. 1 April 2007.

Investment phase of growth businesses had gestating impact on profitability
Consolidated net profit at Rs. 47.8 crore is lower by 38 per cent against Rs. 76.7 crore attained in the corresponding quarter of the preceding year largely on account of the gestating nature of its major businesses viz., life insurance and BPO. That said, in revenues, both life insurance and BPO businesses have registered impressive growth. The other businesses viz., telecom, carbon black and insulators have put in an impressive performance growing in revenues and earnings.

  • The telecom business has reported net profit at Rs. 220.3 crore vis-a-vis Rs. 106.9 crore earned in the corresponding quarter of the last year. The growth in profitability is despite the gestating phase of three new circles launched in the latter half of previous year
  • The life insurance business incurred higher losses of Rs. 83.9 crore during the quarter due to increasing share of new business premium and higher spend on expanding its distribution reach to regain the market share
  • In the BPO business, the bottom line has also been impacted by the interest cost on funding of the acquisition of Minacs, the weakening of US dollar and one time cost of Rs. 11.5 crore besides ramping up and training costs for new business

The standalone net profit during the quarter was higher at Rs. 54.9 crore against Rs. 53.7 crore attained in the corresponding quarter of last year. Insulators and carbon black businesses posted record operating profits during the quarter.

Growth initiatives

  • Birla Sun Life Insurance's emphasis is on regaining its market share, expanding branch network, strengthening its agency force and launching contemporary products
  • Birla Sunlife Asset Management Company has aggressive plans to open new branches and launch innovative products
  • Telecom will strengthen and expand its network in existing circles and better its reach through roll out in Mumbai and Bihar circles. Plans for pan India presence are underway
  • BPO business is scaling its global delivery capacity with focus on migration to high margin KPO segment and low cost locations
  • Madura Garments will aggressively pursue apparel retailing with the launch of large format stores for Peter England and men's lifestyle stores for fashion brands
  • Carbon black business is accelerating greenfield expansion by 1,20,000 mt in Western India
  • Insulators business is expanding its capacity by 8,000 mt besides foraying in polymer insulators
  • Textiles business will increase its capacity in linen fabrics and flax yarns
  • Fertilisers business will focus on de-bottlenecking to increase capacity

In most of our businesses, we are going ahead with our investment plans to leverage growth opportunities. Aditya Birla Nuvo is very optimistic about meeting the challenges of strategic growth initiatives and enhancing its revenues and earnings, but for some more time, given the investments in growth phase, the life insurance and BPO businesses will create a stretch on profitability.