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Aditya Birla Nuvo reports good performance for the quarter ended 30 June 2007

30th July, 2007

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Q1 FY08
Consolidated net sales Rs. 2320.8 crore 78 per cent
Consolidated net profit Rs. 99.8 crore 50 per cent

Particulars
Consolidated
Quarter ended 30 June
2007
2006
Growth per cent
Net income from operations
2,320.8
1,305.7
78
Operating profit (PBDIT)
307.2
221.1
39
Profit before depreciation and tax
221.5
170.3
30
Net profit (after minority interest)
99.8
66.7
50
EPS (Rs.)
10.7
7.5
43

Aditya Birla Nuvo has posted good performance for the first quarter ended 30 June 2007.

Substantial growth in revenues
The company's consolidated revenues increased by 78 per cent from Rs. 1305.7 crore to Rs. 2320.8 crore. Revenues from its subsidiaries and joint ventures, where the company has made substantial investments in the past, saw a phenomenal rise of 202 per cent, from Rs. 522.5 crore to Rs. 1579.8 crore. All the businesses are on high growth trajectory.

  • Telecom business has shown a spectacular growth in revenues from Rs. 899.9 crore to Rs. 1477.3 crore up by 64 per cent
  • In the BPO sector revenues have soared from Rs. 48.1 crore to Rs. 352.4 crore with the acquisition of Minacs on 18 August 2006
  • Life insurance has reported a total income of Rs. 625.4 crore, up by 205 per cent with an increase in its distribution reach
  • However, standalone revenues declined from Rs. 783.2 crore to Rs. 741.0 crore. This was on account of the transfer of contract export business to a wholly-owned subsidiary on 1 July 2006 and a planned shutdown at the fertilisers plant for 42 days for maintenance and de-bottlenecking.

Growth in consolidated net profit
The company's consolidated net profit of Rs. 99.8 crore grew by 50 per cent over Rs. 66.7 crore attained in the corresponding quarter of the last year.

The contribution of joint ventures and subsidiaries to net profit has jumped from Rs. 10.4 crore to Rs. 73.3 crore.

Telecom's net profit at Rs. 308.5 crore vis-a-vis Rs. 89.2 crore earned in the corresponding quarter of the last year is commendable. The growth in profitability is despite launches in three new circles.

Life insurance incurred higher losses due to higher spends on augmenting its sales force and opening new branches to regain the market share.

The BPO business bottom line has been constrained by the interest burden on funding its new acquisition and by the weakening of US Dollar.

The company's standalone net profit has been impacted by the planned shutdown at the fertilisers plant for 42 days, which reduced the profits of the fertilisers business substantially. High interest cost on borrowings for funding of investment in Idea and various capex initiatives also impaired profitability. Additionally, the profits of Madura Garments were lower due to a massive ramp up. Hence the standalone net profit is down from Rs. 56.3 crore to Rs. 26.5 crore.

Business performance

Garments
Branded garments business continued to expand its retail space. Branded garments business revenues grew, on like-to-like basis, by 14 per cent from Rs. 141.3 crore to Rs. 161.2 crore. Operating profit saw a decline with stock liquidation, high lease rentals, high discount and the dormancy phenomena across the industry.

The contract exports business has been divested into Madura Garments Exports Limited from 1 July 2006. On a like-to-like basis volumes increased through the revenues were almost flat at Rs. 39.2 crore impacted by a stronger Rupee. The phase I of a new facility to manufacture shirts is slated to commence production from August 2007.

Rayon division
Rayon division recorded revenues of Rs. 104.0 crore against Rs. 112.2 crore in the corresponding quarter of the last year. VFY segment revenues were at Rs. 70.0 crore, impacted by lower sales volumes of VFY. In the chlor-alkali segment, revenues declined by 12 per cent at Rs. 34.0 crore due to lower ECU realisation.

Carbon black division
Capitalising on the vibrant auto sector, the Carbon black division continues to show a good performance. Revenues stood at Rs. 161.2 crore vis-a-vis Rs. 175.1 crore in the corresponding quarter of the last year, on account of lower sales volumes due to the plant shutdown for annual maintenance. The brownfield capacity expansion of 60,000 mtpa at Gummidipondi has been commissioned in July 2007.

Textiles division
Textiles division's revenues have dropped by 4 per cent from Rs. 154.8 crore to Rs. 148.8 crore. In the wool segment, revenues have stepped up. In line with its strategy to exit from the synthetic segment, the Rajashree Syntex unit at Midnapur was divested on 1 July 2007. Operating profits have been flat at Rs. 15.9 crore despite downsizing in the synthetic segment.

Fertilisers division
The net turnover of the fertiliser division stood at Rs. 116.3 crore with operating profit at Rs. 17.0 crore. Both are lower compared to the corresponding quarter of the last year because of the plant shutdown for maintenance and de-bottlenecking.

Insulators business
Insulators business has reported revenues of Rs. 84.1 crore vis-a-vis Rs. 53.4 crore attained in the preceding year, and a higher operating profit at Rs. 26.58 crore as against Rs. 8.24 crore in Q1 of FY 07. The preceding year's revenues and operating profit were constrained by the strike at Halol plant. An optimised product mix improved realisations in the growing market for insulators.

Telecom bussiness
In the telecom business, Idea Cellular ended the quarter with a subscriber base of 16.13 mn, adding 2.12 mn subscribers during the quarter. In its current 11 service areas of operation, Idea consolidated its subscriber market share from 14.9 per cent at the end of March 2007, to 15.4 per cent at the end of June 2007. Revenues for the quarter showed an impressive jump of 64 per cent at Rs. 1477.3 crore. The company posted a healthy rise in profits despite the gestation period for the three newly rolled-out circles putting pressure on EBITDA margins.

Financial services
In the life insurance business at Birla Sun Life Insurance, the total income rose by 205 per cent to Rs. 625.4 crore. The individual business annualised premium grew by 44 per cent at Rs. 344.6 crore. The company is focusing on expanding its distribution reach. During the quarter the direct sales force has increased from 56,603 to 60,676. As a result of these long-term investments, net loss is higher at Rs. 33.6 crore from Rs. 19.3 crore in the corresponding quarter of the preceding year.

In the asset management business at Birla Sun Life Asset Management Company, assets under management (AUM) stood at Rs. 21,594 crore with a domestic market share of 4.9 per cent. The business reported revenues of Rs. 20.1 crore and net profit at Rs. 1.7 crore.

ITES/IT
In the BPO business, an important step was taken by re-branding of Transworks-Minacs as Aditya Birla Minacs. At TransWorks, revenues stood at Rs. 42.2 crore as against Rs. 48.1 crore in Q1 FY 07 and net loss at Rs. 3.1 crore as against net profit of Rs. 6.3 crore in Q1 FY 07. Minacs reported revenues at Rs. 310.2 crore and net loss at Rs. 4.8 crore. The weakening of the US Dollar and higher interest cost on borrowings for the acquisition of Minacs have affected this business's profitability.

In the software business at PSI Data Systems, revenues stood at Rs. 23.5 crore against Rs. 23.2 crore in the corresponding quarter of the last year.

Merger of Aditya Birla Insulators Limited
The Board of Directors of the company, at its meeting held on 3 May 2007, have approved, subject to requisite approvals, the merger of Aditya Birla Insulators Limited (ABIL), a wholly owned subsidiary of the company, with the company with effect from 1 April 2007 through a Scheme of Amalgamation (Scheme), u/s 391 to 394 of the Companies Act, 1956. On the Scheme coming into effect, the business of ABIL will be transferred to the company on an on-going concern basis.

Growth initiatives

  • Madura Garments will aggressively pursue retailing of lifestyle and popular brands by expanding its reach with larger store size besides creating specialised outlets
  • Carbon black is working on the environmental clearance for 1,20,000 tpa greenfield project in Western India
  • Textiles will increase its capacity in linen fabrics and flax yarns
  • Fertilisers will focus on de-bottlenecking to increase capacity
  • Insulators business is expanding its capacity and investing for yield improvement
  • Telecom will strengthen and expand its network in existing circles and better its reach through a roll-out in Mumbai and Bihar circles. Plans for acquiring licences in the remaining circles are underway
  • Birla Sun Life Insurance's emphasis is on regaining its market position of being amongst the top three, increasing the branch network, strengthening its agency force and launching contemporary products
  • AMC and distribution have aggressive branch opening plans as well
  • The BPO business is working on a global delivery model with an additional share of KPO business

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 stretching out in the short term.