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Aditya Birla Nuvo reports good performance for year ended 31 March 2007

3rd May, 2007

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Fourth quarter
Full Year
Consolidated net sales Rs.2544.1 crore 45 per cent Rs. 8258.0 crore 65 per cent
Consolidated net profit Rs.82.5 crore 18 per cent Rs. 281.238 per cent

Particulars
Quarter ended 31 March
Full year ended on 31 March
2007
2006
Growth %
2007
2006
Growth %
Net income from operations
2,544.1
1,755.0
45
8,258.0
5,006.9
65
Operating profit (PBDIT)
305.0
199.8
53
1,139.1
615.7
85
Profit before depreciation and tax
195.6
163.6
20
776.2
511.9
52
Net profit (after minority interest)
82.5
70.1
18
281.2
204.1
38
EPS (Rs.)
9.0
7.9
14
32.0
26.1
23


Aditya Birla Nuvo has posted good performance for the year ended 31 March 2007.

Substantial growth in revenues
The company's consolidated turnover of Rs.8258.0 crore is up by 65 per cent over Rs.5006.9 crore achieved in the preceding year. The company's standalone turnover at Rs.3420.5 crore grew by 29 per cent vis-a-vis Rs.2642.0 crore attained in the preceding year.

Revenues from its subsidiaries and joint ventures, where the company has made substantial investments in the past, saw a phenomenal rise of 105 per cent, from Rs.2364.9 crore to Rs.4837.5 crore.

All the businesses are on high growth trajectory.

  • Telecom business has shown a spectacular growth in revenues from Rs.2965.5 crore to Rs.4366.4 crore up by 47 per cent, almost doubling the subscriber base. During the year, the company raised its stake in Idea Cellular from 20.74 per cent to 31.78 per cent (post IPO)
  • In BPO business, revenues have soared to 1015.5 crore with the acquisition of Minacs on 18 August 2006. In the preceding year, revenues stood at Rs.163.3 crore.
  • Life Insurance has reported a total income of Rs.1960.0 crore, up by 24 per cent with an increase in its distribution reach.
  • Garments business achieved a turnover of Rs.830.4 crore vis-a-vis Rs.620.6 crore while maintaining its industry leadership.

Growth in profit across businesses
The company's consolidated net profit of Rs.281.2 crore grew by 38 per cent over Rs.204.1 crore in the preceding year.

Its standalone net profit at Rs.225.0 crore is higher by 20 per cent as against Rs.186.9 crore earned preceding year. At the operating level all the businesses have done well. The company's standalone operating profit is up by 36 per cent at Rs.603.8 crore. A major rise in interest cost on account of borrowings for the acquisition of a higher stake in Idea has strained profit numbers, which could have been much higher.

The contribution of joint ventures and subsidiaries to net profit has been at Rs.56.3 crore as against Rs.17.1 crore preceding year.

  • Telecom's net profit at Rs.503.3 crore vis-a-vis Rs.211.8 crore earned preceding year is commendable. The growth in profitability is despite launches in three new circles.
  • Life insurance incurred higher losses due to higher spend on augmenting its sales force and opening new branches to regain the market share.
  • The BPO business bottom line has been impacted by the interest burden on funding its new acquisition, restructuring and accounting readjustment at Minacs, to bring it at par with Indian accounting standards.
  • In the standalone businesses, garments and Carbon Black have substantively contributed to the operating profit of the company.

Successful completion of the rights issue
The company has raised Rs.777.2 crore through a rights issue. The equity share capital of the company has increased from Rs.83.5 crore to Rs.93.3 crore. The proceeds are being used for repayment of debt and fresh investments in Idea.

Dividend
The company had paid an interim dividend of 55 per cent in March 2007 which was treated as the final dividend for the current year as against 50 per cent preceding year. The dividend outgo, including dividend tax, has been at Rs.58.5 crore against Rs.47.6 crore preceding year.

Standalone performance

Garments
In branded garments business, fashion brands viz. Louis Philippe, Van Heusen, Allen Solly and Espirit saw a healthy growth supported by new launches. The popular brand Peter England continued to expand its reach. Innovative merchandise and creative campaigns have resulted in an upsurge in brand equity; further entrenching Madura Garments' leadership status. The division is aggressively expanding its controlled retail space.

Branded garments business revenues grew, on like to like basis, by 28 per cent to Rs.670.4 crore vis-a-vis Rs.525.7 crore recorded in the preceding year. Operating profit, on like to like basis, is up by 33 per cent supported by better channel mix and pricing despite high discount and the dormancy phenomena across the industry.

The contract exports business has been divested into Madura Garment Exports Limited from 1 July 2006. Volumes increased through capacity expansion and revenues grew, on like to like basis, by 58 per cent to Rs.173.2 crore. A new facility to manufacture shirts is slated to be completed by August 2007, which will give a fillip to the contract exports business.

Rayon division
VFY segment recorded sales volumes at 17,039 tonnes against 17,380 tonnes in the preceding year. Aided by a 13 per cent increase in realisation rates, revenues stepped up by 11 per cent to Rs.288.6 crore as against Rs.260.4 crore in the preceding year.

In chlor-alkali segment, ECU realisation remained flat but the volumes rose by 18 per cent backed by expanded caustic soda capacity. This resulted in a 22 per cent growth in revenues at 152.8 crore as against Rs.125.2 crore in the preceding year.

Carbon Black division
Capitalising on the vibrant auto sector growth Carbon Black division continues to show a robust performance. Sales volumes stood at 180,893 tonnes, the highest ever recorded in a year. Realisation is up by 27 per cent on account of high CBFS prices and optimised product, market and logistics mix. Revenues at Rs.738.9 crore extended by 31 per cent vis-a-vis Rs.564.2 crore attained in the preceding year. Operating profits are higher by 43 per cent at Rs.132.2 crore.

Textiles division
Textiles division's revenues have gone up by 18 per cent to Rs.625.0 crore as against Rs.527.7 crore in the preceding year. Operating profits increased by 19 per cent at Rs.67.4 crore despite downsizing in the synthetic segment which is being phased out. Linen fabric volumes remained flat. Linen yarn witnessed increase in volumes and the wool segment outperformed with higher volumes and realisations.

Fertilisers division
Increased operational efficiencies coupled with the rising demand for urea, aided the fertiliser division's production and sales to reach highest levels at 10.28 lakh mt and 10.44 lakh mt respectively for the year ended 31 March 2007. Its net turnover stood at Rs.778.5 crore, while operating profits have been impressive at Rs.129.6 crore. The stringent pricing policy norms announced on 8 March 2007 (with retrospective effect from 1 October 2006) have affected the profits for second half year.

Insulators business
Insulators business has reported revenues of Rs.289.5 crore vis-a-vis Rs.362.5 crore attained in the preceding year. Revenues have been affected by an illegal strike at the Halol plant for major part of the year. After amicable settlement with the workers in December 2006, the working of the plant is normalised now at improved efficiency, the full benefit of which of will be reflected in financial year 2007-08. The business has reported a higher operating profit at Rs.54.3 crore as against Rs.44.0 crore in the preceding year, supported by improved realisations and a strong demand for insulators.

Other joint ventures and subsidiaries
In telecom business, Idea Cellular's subscriber base at 14.01 million doubled over preceding year, recording an 8.63 per cent market share. Revenues for the year showed an impressive jump of 47 per cent at Rs.4366.4 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. Idea strengthened its balance sheet by raising Rs.2819 crore through an IPO and pre- IPO placement. Post IPO, Nuvo's share in Idea has diluted to 31.78 per cent. The Mumbai and Bihar circles are expected to be operational by Januray 2008.

In life insurance business at Birla Sun Life Insurance, the total premium income grew by 41 per cent to Rs.1735.2 crore. The individual business annualised premium grew by 41 per cent at Rs.1575.0 crore. The company is focusing on expanding its distribution reach; today it has 137 branches as against 85 in the preceding year and the direct sales force has increased to 56,603 from 17,986 in preceding year. As a result of these long-term investments, net loss has increased to Rs.139.7 crore from Rs.61.1 crore in the preceding year.

In the asset management business at Birla Sun Asset Management Company, assets under management (AUM) stood at Rs.20,849 crore with 5.8 per cent market share. Business reported revenues at Rs.81.9 crore and net profits at Rs.14.3 crore.

In BPO business, at TransWorks, revenues rose by 21 per cent to Rs.197.2 crore supported by the improved share of non-voice business. Minacs reported revenues at Rs.818.4 crore for the period from 18 August 2006, the date of its acquisition to 31 March 2007. The profits of Minacs have been affected by unusual items like one time restructuring cost and accounting readjustment expenses. In Philippines, the Manila centre went live in March 2007.

On a combined basis, the BPO business has 21 delivery centres in seven countries across three continents. With a global client base including 15 Fortune 500 companies, the business supports customers in 30 different languages. It has over 11,000 employees worldwide. The BPO business now has a global delivery model with integrated management and marketing structure.

In software business at PSI Data Systems, revenues stood at Rs.93.6 crore with a positive bottom line. The company has ramped up its sales team and net staff strength is up from 573 to 684 during the year. The company has added 20 marquee clients while focusing on core verticals viz. corporate banking and high tech.

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, 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 bigger size stores besides creating specialised outlets
  • Carbon Black's brownfield expansion of 60,000 tpa is targeted by the end of June 2007. Land acquisition for 1,20,000 tpa greenfield project in western India is being accelerated
  • Fertilisers will focus on debottlenecking to increase capacity
  • Textiles will increase its capacity in linen fabrics and flax yarns
  • Insulators is expanding its capacity and investing for yield improvement
  • 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
  • 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. National long distance roll out is being worked upon.

Investments in various businesses are happening in their growth phases which seem to be coinciding. Aditya Birla Nuvo is very optimistic about coping with the challenges of strategic and growth initiatives and stretching out in the short term.