The 1st Quarter of FY 2011 has, however, not been a good one for Hyderabad Industries. Hyderabad Industries reported a sharp drop in standalone net profit for the quarter ended June 2010. Hyderabad Industries’ net profit was down at Rs 27.7 crores as compared to Rs 31.4 crores in the corresponding period last year. This is a steep drop of 11.75%. The Sales were marginally higher by 4.10% at Rs 216.29 crores in the quarter ended June 2010 as against Rs 207.78 crores in the previous quarter ended June 2009. The EBITDA margins were lower at 19.9% as compared to 24%.
Abhaya Shankar, Managing Director of Hyderabad Industries explained on CNBC that there were two reasons for the decline. The first is the seasonal nature of the business. Though the first quarter is a peak season because the farmers have harvested their crops and then rebuild their houses, this year the peak season has not shown up probably due to the poor monsoons last year.
The second reason for the fall in profitability of Hyderabad Industries is the increase in excise duty from 4% to 10%. This put pressure on Hyderabad Industries‘ margins. There was also some increase in the freight which contributed to lowering the margins of Hyderabad Industries.
Hyderabad Industries’ Q1 2011 Results
|
| (Rs cr) | Jun 2010 | Jun 2009 | YOY |
|---|---|---|---|
| Operating Income | 217.63 | 208.54 | 4.36 |
| Total Expenses | 172.86 | 156.69 | 10.32 |
| Operating Profit | 44.77 | 51.85 | -13.65 |
| Other Income | 0.90 | 0.72 | 25.00 |
| PBDIT | 45.67 | 52.57 | -13.13 |
| PBT | 41.05 | 47.80 | -14.12 |
| Adjusted Net Profit | 27.71 | 31.43 | -11.84 |
Hyderabad Industries is likely to see an increase in demand for its products. While the industry itself is showing growth rates of about 6%, Hyderabad Industries has green building products such as insulation products and panels which are getting very popular with more customer acceptance and these products will probably show a double digit growth rate in terms of revenue.
Hyderabad Industries has commenced commercial production of the new AAC Blocks manufacturing unit at Golan, near Surat, Gujarat. This unit was setup by Hyderabad Industries in a record time of 14 months and after satisfactory completion of trial runs, Hyderabad Industries commenced commercial production on July 18, 2010.
The new AAC Blocks unit will help Hyderabad Industries to cater to the growing market for AAC Blocks in the western part of the country, as the demand for this product is expanding due to its inherent advantages of light weight, good compressive strength heat and sound insulation and faster rate of construction. The sales of blocks will increase by 50% this year.
Further, Hyderabad Industries‘ thermal insulation products manufacturing unit at Dharuhera has reopened pursuant to the Haryana State Pollution Control Board’s order dated July 12, 2010. Hyderabad Industries‘ has taken necessary steps to comply with all the conditions specified in the said order and has recommenced its operations on July 14, 2010 at its thermal insulation products manufacturing unit at Dharuhera.
Overall Hyderabad Industries is expected to report growth in excess of 10% this year.
The other positive aspect is that though Hyderabad Industries has a capex plan of almost Rs 100 crores, it will not dilute equity. Hyderabad Industries has a strong balance sheet. Its debts have actually lowered as compared to last year at the same time. Hyderabad Industries will fund the Rs 100 crores capex from internal resources and a bit of bank loans but there is no proposal to dilute the equity. This is very good news for investors.
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