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Aditya Birla Nuvo sustains performance for Q3 2007

29th January, 2007

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Third quarter
9 months
Consolidated net sales Rs.2288.78 crore 70 per cent Rs. 5714.59 crore 83 per cent
Consolidated net profit Rs.55.34 crore Rs.198.7148 per cent

Consolidated
Quarter ended 31 December
9 months ended 31 December
2006
2005
Growth %
2006
2005
Growth %
Net income from operations
2,288.78
1,350.23
69.5
5,714.59
3,127.91
82.7
Operating profit (PBDIT)
307.92
202.77
51.9
834.08
415.97
100.5
Profit before depreciation and tax
195.04
162.44
20.1
580.63
348.28
66.7
Net profit (after minority interest)
55.34
55.00
0.6
198.71
133.93
48.4
EPS (Rs.)
6.21
6.38
(2.7)
22.76
18.62
22.2

Aditya Birla Nuvo has posted satisfactory results for the third quarter ended 31 December 2006.

Strategic highlights
The company has invested Rs.1373 crore in Idea and Rs.150 crore in the BPO business in the current fiscal. To fund these, the company has borrowed funds, which has impacted net profit.

The funds raised through the rights issue will be used to neutralise the impact going forward. The company received a 100 per cent subscription for its rights issue of 98,26,638 equity shares of Rs.10 each at a premium of Rs.783 per share, aggregating to Rs.779.25 crore. The allotment of shares is in process.

The company along with its wholly-owned subsidiary has purchased shares from the joint venture partner, NGK Insulators Limited (NGK) in the joint venture Birla NGK Insulators Private Limited (Birla NGK). Consequently, Birla NGK has become a subsidiary of Aditya Birla Nuvo with effect from 29 November 2006. Its name has been changed to Aditya Birla Insulators Limited. This has impacted profitability of the quarter, given key large outflow of the funds for these investments. However, we believe, these strategic investments are solid and will yield handsome results to the company.

Substantial growth in revenue
Its consolidated revenue at Rs.2288.78 crore has risen by 69.5 per cent vis-a-vis Rs.1350.23 crore achieved in the corresponding quarter of the previous year. While the telecom business has shown impressive growth in revenues and profit, it was neutralised by the ramping up costs of the life insurance and restructuring, accounting readjustment expenses in the BPO-Minacs businesses.

The performance of the insulator business was affected by a strike, which also has resulted in losses. That despite these factors, net profit has been sustained at Rs.55.34 crore as against Rs.55.00 crore in the comparable quarter is indeed commendable. All of the businesses are on a high growth trajectory.

Growth across value businesses
Aditya Birla Nuvo's stand-alone turnover at Rs.881.15 crore, grew by 13.5 per cent vis-a-vis Rs.776.22 crore attained in the previous year. Operating profit rose by 13.9 per cent from Rs.133.00 crore to Rs.151.53 crore. The stand-alone net profit is Rs.52.71 crore against Rs.51.20 crore. While the stand-alone businesses contributed to top-line and bottom-line growth, higher interests cost has impacted the profit numbers. At the operating level all the businesses have done well.

Madura Garments
Madura Garments' reported revenues at Rs.165.76 crore vis-a-vis Rs.170.76 crore recorded in the previous year, even though its manufacturing contract business was hived off into a wholly owned subsidiary in July 2006. On a like-to-like basis, revenues has grown by 13.5 per cent. Madura Garments' operating profit stood at Rs.18.12 crore. To enlarge its footprint and to give the customer an international retail experience, the division is aggressively expanding large format exclusive brand outlets, along with selected stores. Madura Garments has a retail space of 3.6 lakhs sq ft.

At Madura Garments Exports, revenues rose from Rs.31.44 to Rs.44.24 crore. The expansion of its shirts and trousers capacity has been completed. Its greenfield shirts project at Bangalore is on schedule.

Rayon division
The Rayon division's revenues at Rs.109.48 crore reflect a rise of 7.3 per cent vis-a-vis Rs.102.06 crore in the corresponding quarter of the previous year. The division's operating profit is higher at Rs.32.19 crore (Rs.18.45 crore) supported by higher realisations. Its 25 tpd caustic soda expansion is expected to be completed by March 2007.

Carbon Black division
The Carbon Black division's revenues at Rs.196.90 crore rose by 31.4 per cent vis-a-vis Rs.149.83 crore in the corresponding quarter of the previous year. The division's realisation is up by 34 per cent due to a change in the market and product mix. Operating profits are higher by 49.8 per cent at Rs.35.82 crore aided by higher realisations. Its 60,000 tpa brownfield expansion is expected to go on stream by June 2007. It is also accelerating the greenfield expansion of 120,000 mt in Western India.

Fertilisers division
The net turnover of the Fertiliser division stood at Rs.226.13 crore. Its operating profit at Rs.39.03 crore is higher by 7.9 per cent, backed by increased volumes, which at 287 kmt has been higher than the corresponding quarter of the previous year.

Textiles division
The Textiles division's revenues rose by 11.5 per cent to Rs.155.93 crore as against Rs.139.81 crore in the corresponding quarter of the last year. To meet the growing demand for linen, the company is increasing its fabric and flax spinning capacity at a cost of Rs.31.5 crore and Rs.31.0 crore respectively.

Insulators
Aditya Birla Insulators Limited, recorded a turnover of Rs.51.39 crore lower than the corresponding quarter of the previous year due to an illegal strike at one of its manufacturing units in Halol. This has resulted in a loss of Rs.1.24 crore against a net profit of Rs.1.83 crore in the corresponding quarter of the previous year. The strike has been called off and production is being stabilised with new productivity norms.

Telecom
Idea Cellular's subscriber base has increased to 12.4 million. Revenues for the quarter showed an impressive jump of 49.9 per cent at Rs.1,148.20 crore. Idea is set launch its IPO in a fortnight to raise Rs.2,125 crore (excluding pre-placement and 15 per cent green shoe option) through the fresh issue of equity shares. It has received licenses for Mumbai and Bihar and has recently launched commercial operations in H.P, U.P (E) and Rajasthan.

ITES
At TransWorks India, revenues have risen by 17.9 per cent to Rs. 49.76 crore vis-a-vis Rs.42.22 crore in the corresponding quarter of the previous year. It has added four new clients during the quarter taking the total number of clients to 26. The company improved its business mix with a growing share of nonvoice business.

Minacs, Canada recorded a turnover of Rs.327.78 crore and a loss of Rs.28.27 crore consequent to higher ramp-ups and training costs.

Life insurance
At Birla Sun Life Insurance, the total income is up by 62.9 per cent to Rs.494.42 crore. The individual new business annualised premium advanced by 16 per cent at Rs.168.0 crore. The company has set up four new branches and added an agency force of 15,827. It is taking necessary steps to regain its market share by introducing innovative and traditional products. During the quarter, Aditya Birla Nuvo infused Rs.32.9 crore towards its share of capital to meet its solvency margin.

Financial services
The Financial services division's income stood at Rs.4.57 crore. New businesses are being pursued by the company's wholly-owned subsidiary Birla Global Finance Company Ltd (BGFCL), which has an income of Rs.18.20 crore and a net profit of Rs.4.30 crore.

At Birla Sun Life Asset Management, the assets under management shot up to Rs.18,736 crore vis-avis Rs.13,422 crore in the corresponding quarter of the earlier year. The company achieved revenues of Rs.20.12 crore.

IT services
PSI Data Systems posted revenues of Rs.21.84 crore and a net loss of Rs.1.62 crore as compared to a turnover of Rs.21.14 crore and a net profit of Rs.0.59 crore in Q3 FY 2005-2006. The marginal net loss of Rs.1.62 crore is due to one-time costs charge, building bench strength, increased marketing and sales expenditure coupled with the development of software contracts and components that will strengthen the company's go-to-market strategy.

Overall, the outlook for Aditya Birla Nuvo is optimistic, given its strategic thrust, growth and the capex initiatives taken in each of the businesses.