Sintex Industries

The consolidated net sales declined by 2% to Rs 1160.81 crore. Plastic business declined by 2% to Rs 1046.26 crore while textile business was stagnant at Rs 114.55 crore. In the plastic business, building material business de-grew by 14% to Rs 524 crore while custom molding business grew by 13% to Rs 520 crore.

The major portion of building materials business is driven by government social spending. The Prefabricated building systems is going strong due to its nature of business. Being smaller ticket per site, faster execution and clearances and concentrated in rural segment, the business is relatively smoother in the current turbulent times. The monolithic business catering to the low cost housing segment is seeing a slowdown in clearances, allocation of sites and slight stretch in payment schedule, this is beyond the company's ability to expedite executions considering the set framework. Building materials order book currently stands at Rs 3000 crore.

Global uncertainty in the European and US economies has led to a slowdown across custom molding business. This has resulted in customers taking a cautious approach on future spending across segments. As a result, the company's subsidiaries in US and Europe are facing lower volumes and under utilization of capacities. Thus, the margins have seen a decline during the quarter under review. Apart from global uncertainties, slowdown in domestic automotive segment has impacted operations locally.

The OPM declined by 253 basis points to 14.1% due to increase in other expenditure by 575 basis points to 25.22% and employee cost by 168 basis points to 19.49% of adjusted net sales. The subsidiary margins fell 3.3% due by lower utilization and falling volumes. Also monolithic margins were down by 2% due to slower executions. As a result, the operating profit declined by 17% to Rs 163.13 crore.

The PBT before Forex has declined by 33% to Rs 96.41 crore. There was forex gain of Rs 13.54 crore. The PBT has decreased by 24% to Rs 109.95 crore.

Management Comment

Commenting on the company's financial performance, Mr. Amit Patel, Managing Director, Sintex Industries, said:

Its been a turbulent quarter as far as realigning of strategies is concerned. A depreciating rupee, slow down in the domestic economy and delays on the government front, our building products business has been flat. Despite this the prefabricated building systems is relatively better driven by smaller ticket sizes, faster execution and clearances. We strongly believe the blip in buildings products is a temporary phenomena, we should be back on the growth track as things on the ground emerge clearer in the near future. By and large our strategy is to focus on better working capital management, curtail capex and conserve cash for future requirements.

Our broad strategy will help us emerge sleek on the balance sheet over next 18 to 24 months with higher returns on our businesses. I think this will benefit all our stake holders in the medium to long term.

Consolidated Results

For the quarter ended December 2011

The consolidated net sales declined by 2% to Rs 1160.81 crore. Plastic business declined by 2% to Rs 1046.26 crore while textile business was stagnant at Rs 114.55 crore. In the plastic business, building material business de-grew by 14% to Rs 524 crore while custom molding business grew by 13% to Rs 520 crore.

The major portion of building materials business is driven by government social spending. The Prefabricated building systems is going strong due to its nature of business. Being smaller ticket per site, faster execution and clearances and concentrated in rural segment, the business is relatively smoother in the current turbulent times. The monolithic business catering to the low cost housing segment is seeing a slowdown in clearances, allocation of sites and slight stretch in payment schedule, this is beyond the company's ability to expedite executions considering the set framework. Building materials order book currently stands at Rs 3000 crore.

Global uncertainty in the European and US economies has led to a slowdown across custom molding business. This has resulted in customers taking a cautious approach on future spending across segments. As a result, the company's subsidiaries in US and Europe are facing lower volumes and under utilization of capacities. Thus, the margins have seen a decline during the quarter under review. Apart from global uncertainties, slowdown in domestic automotive segment has impacted operations locally.

The OPM declined by 253 basis points to 14.1% due to increase in other expenditure by 575 basis points to 25.22% and employee cost by 168 basis points to 19.49% of adjusted net sales. The subsidiary margins fell 3.3% due by lower utilization and falling volumes. Also monolithic margins were down by 2% due to slower executions. As a result, the operating profit declined by 17% to Rs 163.13 crore.

The interest cost increased by 27% to Rs 35.39 crore. The depreciation has increased by 25% to Rs 46.71 crore. The PBT before Forex has declined by 33% to Rs 96.41 crore.

There was forex gain of Rs 13.54 crore. The company has recorded forex loss of Rs 60 crore in H1 FY12. As the company has opted for option of change in Accounting Standard - 11 'The Effects of Changes in Foreign Exchange Rates. As a result, there was an excess provision to the extent of Rs 13.5 crore for the first 9 months which was reversed in this quarter. The PBT has decreased by 24% to Rs 109.95 crore.

Tax outgo has decreased by 12% to Rs 28.32 crore. The tax rate stood at 25.8% compared to 22.2% in the corresponding quarter of last year. After considering share of profit from associates, the net profit has decreased by 27% to Rs 82.2 crore.

For nine months ended December 2011

The consolidated net sales have increased 14% to Rs 3429.83 crore. Plastic business grew by 14% to Rs 3091.51 crore and textile business by 10% to Rs 338.33 crore.

The OPM declined by 174 basis points to 16.3% due to increase in raw material cost by 28 basis points to 53.24% and other expenditure by 175 basis points to 14.74% of adjusted net sales. The operating profit inclined by just 3% to Rs 557.68 crore.

Other income decreased by 36% to Rs 38.89 crore. The interest cost increased by 41% to Rs 112.01 crore. The depreciation grew by 23% to Rs 134.31 crore. The PBT before Forex has declined by 16% to Rs 350.26 crore. There was forex loss of Rs 47.07 crore As a result, the PBT has decreased by 20% to Rs 303.19 crore.

The total tax outgo has increased 4% to Rs 89.7 crore. The tax rate stood at 30% compared to 23% in the corresponding period of last year. After considering minority interest and share of profit, the net profit decreased by 26% to Rs 215.58 crore.

Consolidated Segment Performance

Plastics

For Q3 FY12, the plastic division contributed 89% of the total revenue. The revenue declined by 2% to Rs 1046.26 crore. The PBIT margin has declined by 310 basis points to 10.49%. The PBIT has decreased by 25% to Rs 109.79 crore contributing 76% of total PBIT.

For 9M FY12, the division contributed 89% of the total revenue. The revenue has increased 14% to Rs 3091.51 crore. The PBIT margin has declined by 107 basis points to 13.41%. PBIT has increased by 6% to Rs 414.61 crore contributing 100% of total PBIT.

Textiles

For Q3 FY12, the division contributed 10% of the total revenue. The revenue remained stagnant at Rs 114.55 crore. The PBIT margin has declined by 356 basis points to 10.46%. As a result, the PBIT has decreased by 26% to Rs 11.98 crore contributing 8% of total PBIT.

For 9M FY12, the division contributed 10% of the total revenue. The revenue increased 10% to Rs 338.33 crore. The PBIT margin has declined by 262 basis points to 10.48%. As a result, the PBIT has declined by 12% to Rs 35.46 crore contributing 9% of total PBIT.

Other Developments

Sintex Infra Projects a wholly owned subsidiary of Sintex Industries has been awarded EPC order of Rs 1300 crore for 2*150 MW from Shirpur Power Pvt. Ltd.

During the quarter the company has opted for the option given in the paragraph 46A of Accounting Standard - 11 'The Effects of Changes in Foreign Exchange Rates' inserted by the Notification dated December 29, 2011 issued by the Ministry of Corporate Affairs and accounting the Foreign Exchange Loss incurred on Long Term Foreign Currency Monetary Item is amortized over the balance period of such Long Term Foreign Currency Monetary Items. Pursuant to such adoption of the option, total amortization of the Foreign Exchange Loss incurred on Long Term Foreign Currency Monetary Items, for the nine months period ended December 31, 2011 is Rs. 47.06 crore and the resulting adjustment on this account has been given effect in the current quarter.

Valuation

The stock was trading at around Rs 71.75 at BSE on 13^th January 2012.

The promoter has pledged 3.64 crore share representing 38.14% of total shareholding of promoter & promoter group and 13.33% of the total share capital of the company.

The promoter holding in the company is at 34.96%.

Sintex Industries: Consolidated Results

Sintex Industries: Consolidated Segment Results