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Aditya Birla Nuvo reports excellent performance for Q1 FY07

29th July, 2006

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Q1 FY07
Consolidated net sales Rs.1459.12 crore 89 per cent
Consolidated net profit Rs.66.71 crore 102 per cent
Particulars
Consolidated
Stand-alone
 
Quarter ended 30 June
Quarter ended 30 June
 
2006

 2005

2006
2005
Net income from operations
1,459.12
773.66
783.18
485.08
Operating profit
221.13
92.66
146.43
72.49
Profit before tax
95.87
48.49
86.69
46.59
Net profit (after minority interest)
66.71
33.03
56.28
30.75
EPS (Rs.)
7.76
5.42
6.74
5.13

Aditya Birla Nuvo has posted excellent results for the first quarter ended 30th June 2006.

Its consolidated turnover of Rs.1459.12 crore, surged by 88.6 per cent vis-a-vis Rs.773.66 crore achieved in the corresponding quarter of the previous year. Net profit has leapfrogged to Rs.66.71 crore against Rs.33.03 crore. The performance of its JVs and subsidiaries has been impressive as well. Revenue and profit growth was seen across business segments.

The company's stand-alone turnover at Rs.783.18 crore, grew by 61.5 per cent vis-a-vis Rs.485.08 crore attained in the previous year and operating profit by 102.0 per cent from Rs.72.49 crore to Rs.146.43 crore. The stand-alone net profit is higher at Rs.56.28 crore against Rs.30.75 crore, despite a major rise in interest on borrowings and surplus funds used to finance the acquisition of the 31.45 per cent additional stake in Idea Cellular amounting to Rs.2033.7 crore. Revenues and earnings are inclusive of the fertilisers and financial services business, which merged into the company in September 2005.

Sales volume
Net sales (Rs. crore)
Unit
Quarter
Quarterended
30 June
2006
2005
2006
2005
Garments Lakh pcs
22.5
19.1
170.55
127.95
Viscose filament yarn Tonnes
4,402
3,926
112.18
86.81
Carbon black Tonnes
44,475
40,992
175.13
122.26
Fertilisers Tonnes
195
166
128.95
102.96
Textiles
-
-
154.80
110.35

Madura Garments
Madura Garments' revenue has soared by 33.3 per cent to Rs.170.55 crore vis-a-vis Rs.127.95 crore recorded in the previous year. Operating profit at Rs.15.80 crore is up by 79.0 per cent. Strong growth across its product range, particularly in shirts, trousers and suits boosted revenues. Louis Philippe, Van Heusen and Allen Solly - its fashion brands and Peter England - its popular brand, consolidated their market share, and bolstered profitable growth. The thrust on contract exports towards providing full service has also started paying off.

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 Garment has tied up 1.2 lakh sq. ft of retail space in malls and key high streets to be opened in next 2-3 years.

Rayon division
The Rayon division's revenues at Rs.112.18 crore reflect a rise of 29.2 per cent vis-a-vis Rs.86.81 crore in the corresponding quarter of the previous year. Higher volumes and better realisation have been the growth drivers. In the chlor-alkali segment, revenues grew by 23.2 per cent at Rs.38.77 crore, on the back of expanded caustic soda capacity in July 2005, which was partially offset by lower realisation. The division's operating profit is higher at Rs.28.42 crore (Rs.21.63 crore). The 20 mw captive power plant at Veraval will be commissioned during the quarter. The 65 tpd caustic soda expansion is also on track.

Carbon Black division
The Carbon Black division's performance has been impressive. Revenues at Rs.175.13 crore grew by 43.2 per cent vis-a-vis Rs.122.26 crore attained in the corresponding quarter of the previous year. Operating profits are higher by 58.0 per cent at Rs.34.87 crore. Total volumes rose by 8.5 per cent to 44,475 tons led by the strong growth in the auto sector. The division's realisation is up by 26.9 per cent due to a change in the market mix and the partial passing on of the high CBFS prices to its customers. While the company is pursuing environmental clearance for a 55,000 tpa brownfield expansion, the division is also exploring possibilities to set up a greenfield project of 60,000 tpa in Western India.

Fertilisers division
The net turnover of the fertiliser division stood at Rs.128.95 crore. Increased operational efficiencies, coupled with the rising demand for urea fertiliser due to timely pre-monsoon rains, aided the fertiliser division's sales, enabling it to post higher levels at 1.95 lakhs mt. Production at 2.37 lakhs mt represents 109 per cent of re-assessed capacity. The division has attained yet another milestone in being the first fertiliser unit world over to receive Rs.6.93 crore on the sale of CER certificate under Clean Development Mechanism (CDM).

Textiles division
The textiles division's revenues have gone up by 40.3 per cent to Rs.128.95 crore as against Rs.102.96 crore in the preceding corresponding quarter. Operating profits jumped by 47.1per cent buoyed by a strong performance across segments. Its linen segment, comprising linen fabric and flax yarn, continued on its expansive growth trajectory gaining from higher volumes. Value added products and enhanced volumes in wool combing spurred the performance of the worsted segment. Its wool combing capacity was doubled to 8,000 tpa in July 2005. The synthetic segment is being downsized in a phased manner. To meet the growing demand for linen, it is increasing its linen fabric and flax spinning capacity at a cost of Rs.31.5 crore and Rs.31.0 crore respectively.

Financial services division
The financial services division's revenue stood at Rs.11.43 crore. The division continued to maintain its leadership in finance against securities. Finance extended during the quarter increased to Rs.303 crore vis-a-vis Rs. 232 crore, despite the volatility in the capital market, which led to a slow down in IPO offerings. Loan against shares also increased to Rs. 271 crore as against Rs. 209 crore in corresponding quarter of previous year.

Insulators domestic marketing
Insulator domestic marketing division's revenue is lower at Rs.27.87 crore vis-a-vis Rs.34.31 crore in the previous corresponding quarter due to the higher share of direct billing and also a slow down at Halol, despite a 10.4 per cent volume growth.

BIRLA NGK Insulators Private Limited, the 50:50 JV with NGK, has posted a turnover of Rs.51.08 crore, a growth of 10.2 per cent. This was supported by higher realisation, offsetting lower volumes at the Halol unit due to an illegal strike. Led by NGK experts, yield improvement efforts are being pursued. The JV has curtailed its losses substantially from Rs.4.92 crore in the previous year to Rs.3.43 crore in the current year.

Other joint ventures and subsidiaries

Idea Cellular's subscriber base grew by 53.7 per cent to 8.54 million. Revenues for the year showed an impressive jump of 30.6 per cent at Rs.900.09 crore. The company has an 8.1 per cent market share in the total mobility segment. It enjoys a predominant position in Maharastra, Gujarat, Andhra Pradesh, Kerala, Madhya Pradesh, Delhi, U.P. (W) and Haryana. Idea is planning to roll out its services in Rajasthan, Himachal Pradesh and U.P. (E) by the end of this quarter, increasing its presence to 11 circles.

The company along with its subsidiary has purchased 15 per cent equity stake in Idea Cellular Limited for Rs.1372.7 crore on 20 June 2006. With this, the total equity holding of Nuvo has increased to 35.73 per cent. The benefit of additional shareholding will fully reflect in the financials of the company from the next quarter.

At TransWorks, revenues have risen significantly by 26.6 per cent to Rs.48.13 crore vis-a-vis Rs. 38.03 crore in the previous year. While three new major clients were added, business from existing clients was ramped up. The company has also been able to improve its business mix with a growing share of non-voice business. The company is optimising its infrastructure utilisation and service levels leading to improved margins.

TransWorks entered into a definitive agreement, on 24 June 2006, for the acquisition of Minacs Worldwide Inc., Canada's leading BPO provider. TransWorks through its wholly owned subsidiary AV TransWorks, Canada, has made an open offer to the shareholders on 13 July 2006. The transaction is likely to be completed by August end and the deal size is expected to be USD 125 million. With this deal, TransWorks would feature in the top 3 third party BPO service providers in the country, and among the top 10 globally.

At Birla Sun Life Insurance, the total premium income has grown by 73.9 per cent to Rs.273.72 crore. The individual new business annualised premium advanced by 91per cent at Rs.149.78 crore. The company has doubled its branches and agency force as compared to the previous corresponding quarter. The company is focusing on expanding its network by adding 31 branches in this year, while ramping up the agency force considerably. The company is taking necessary steps to regain its market share.

At Birla Sun Life Asset Management, the assets under management increased to Rs.14,611 crore vis-a-vis Rs.11,457 crore in the corresponding quarter of the earlier year. The share of equity funds of the total assets under management increased from 20 per cent to 26 per cent. This has helped the company achieve revenues of Rs.19.53 crore.

At PSI Data Systems, the business has turned into the black with positive net profits on improved margins. Revenues stood at Rs.23.15 crore. Gross margins improved from 33 per cent to 35 per cent through an enhanced share of high margin offshore business and improved manpower utilisation.

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

  • Madura Garment's thrust will continue to be on retail expansion, merchandise management, and optimising cost. In contract exports, strengthening manufacturing, design and product development is on the anvil.
  • VFY's focus is on improving quality. To offset the declining ECU realisation, endeavours to improve productivity and reduce costs are ongoing.
  • Carbon Black expects to push volumes in the domestic market and pass on the increased CBFS cost to its customers.
  • Fertilisers will focus on increasing the share of value added products while maximising volumes through higher operational efficiency, increased on-stream days and de-bottlenecking to raise capacity.
  • In textiles attention will be on value-added yarns and the retail reach of linen fabrics.
    The insulator JV endeavours are to concentrate on higher value products and yield
    improvement.
  • Telecom will be expanding its reach through the roll out in three new circles and pan India presence. Its debt restructuring will further strengthen the company.
  • BPO is geared to up its performance through expanding and optimally utilising its seat capacity through existing and new clients. Simultaneously, focus will be on timely completion and smooth integration of Minacs.
  • Birla Sun Life Insurance's emphasis is on increasing the branch network and strengthening its agency force while enriching its product portfolio, to better its performance.
  • Birla Sun Life Asset Management's focal point is to increase reach and launch innovative products.
  • IT services focus will be on building scalability to support business growth and improving delivery capabilities.