Crompton Greaves (CG), the electrical equipment major registered 8% rise in its consolidated earnings (after minority interest) to Rs 85.90 crore for the quarter ended June 2012 and its revenue was up by 15% to Rs 2811.14 crore. Growth at bottom-line for the quarter despite weak operating level performance where operating profit fell by 8% (to Rs 166.75 crore on 160 bps contraction in operating margin) was largely on account of lower depreciation and lower taxation.
The company changed its accounting policy effective April 1, 2012 in respect of goodwill arising on acquisition of business. The company would be doing an annual impairment testing for goodwill instead of the current practice of amortization. Had the company not changed the accounting policy as above the depreciation and amortization would have been higher by Rs 18.82 crore and net profit would have been lower by the same amount.
On standalone basis the company registered a sales growth of 13% (to Rs 1659.17 crore) but its operating margin was lower by 15% (to Rs 158.36 crore) on the back of 320 bps contraction in operating margin. And eventually the net profit was lower by 7% to Rs 120.27 crore.
On deducting from the consolidated figures, the standalone figures, the aggregate sales of subsidiaries (largely of overseas subsidiaries i.e. Ganz, Powells etc.,) was higher by 19% to Rs 1151.97 crore and at operating level it was a profit of Rs 8.39 crore as against a loss of Rs 4.80 crore in the corresponding previous period. Though there was profit at operating level it is not good enough to cover the interest cost and depreciation thus at bottom-line it was a loss of Rs 35.33 crore for the quarter compared to a loss of Rs 51.26 crore in the corresponding previous period. With standalone PAT stood lower by 7%, the 9% rise in consolidated performance is largely on account of lower loss at overseas subsidiaries.
On year on year basis the Rupee has depreciated against Euro to the extent of 7.8% in Q1FY13 and this has a positive impact on the aggregate revenue of subsidiaries which was up by 19% yoy in rupee terms.
The aggregate revenue of overseas power business as identified by deducting from consolidated power systems figures, the standalone figures, was higher by 14% to Rs 1081.47 crore but its segment profit was a loss of Rs 13.68 crore compared to a loss of Rs 31.61 crore in the corresponding previous period. It seems suboptimal operations of overseas power subsidiaries leaving high cost fixed cost uncovered as well as fragmented sourcing of raw materials has impacted the profits.
At the same time the Indian power business, as represented by standalone power segment figures, continue to be impacted by lower realisation on the back of aggressive competition. While the segment revenue of standalone power systems was up by 20% to Rs 680.53 crore but its segment profit was lower by 16% to Rs 60.34 crore on the back of downward pressure in margin.
Consumer products business of the company has registered 20% rise in segment revenue to Rs 652.07 crore but hurt by contraction in margin, the growth at segment profit was limited to 11% to Rs 83.40 crore. Contraction in margin is largely on account of fierce competition in the market place and efforts of the company to retain its market share at the cost of margin.
Segment revenue of consolidated Industrial Systems was higher by 7% to Rs 405.05 crore and the upside is largely on account of good growth in revenue of subsidiaries as the standalone segment revenue was lower by 6% to Rs 338.59 crore. Consolidated segment profit of industrial systems was lower by 28% to Rs 36.47 crore as the standalone segment profit of it down by 25% (to Rs 42.98 crore) and that of subsidiaries register a loss of Rs 6.51 crore compared to that of Rs 6.70 crore in the corresponding previous period.
The material cost as proportion to sales (net of stocks) was lower by 310 bps (to 56.3%)at consolidated level. Similarly the other expenses were lower by 10 bps to 11.2%. However the traded goods was up by 290 bps to 13.6% and the staff cost was up by 170 bps to 13.5%. Thus there was pressure on margin and the operating profit was lower 8% to Rs 166.75 crore.
The other income was higher by 27% to Rs 19.19 crore. The interest and depreciation cost was lower by 10% (to Rs 9.89 crore) and 23% (to Rs 46.61 crore) respectively. Thus gained largely by lower depreciation, the PBT was higher by 3% to Rs 129.44 crore. The tax incidence was lower at 34.3% (against 37.9% in Q1FY12) thus leading to 9% growth in PAT to Rs 84.94 crore. After accounting for minority interest and share of profit/loss from associates the net profit was higher by 8% to Rs 85.90 crore.
Consolidated revenue was higher by 12% to Rs 11248.58 crore and its operating profit was lower by 40% to Rs 803.64 crore with the operating margin crash to 7.1% from 13.4% in the corresponding previous period. Eventually the PAT was lower by 60% to Rs 367.60 crore. The EO net of tax was nil for the fiscal compared to Rs 38.12 crore in the corresponding previous period. Thus on deflated basis, the PAT after EO (net of tax) was lower by 58% to Rs 367.60 crore. Thus the net profit (after minority interest) was lower by 58% to Rs 373.59 crore.
During the quarter ended June 2012, the company has proposed that its Belgium operations be optimized for cost advantages, through administrative cost reduction measures and a right sizing of its workforce to create a globally competitive and sustainable business model in Europe. The company has begun a process of consultation with works council and its employees in Belgium and will recognize the liability after reaching on consensus from the said authority and employees.
The company is to pay an interim dividend of Rs 0.40 per share of Rs 2 face value for FY2012-13.
Promoter holding as end of June 30, 2012 stood unchanged at 41.69% compared to sequential previous quarter ended March 2012 but it was marginally higher compared to 40.92% as end of June 2011 end.
The stock hovers around Rs 130.10.
Crompton Greaves: Consolidated Results
Crompton Greaves: Results
Crompton Greaves: Consolidated Segment Results
Crompton Greaves: Standalone Segment Results