Carborundum Universal Q1 net profit up 126%

July 30, 2010 - Carborundum Universal has announced that the Board of Directors met today and approved the results for the quarter ended 30th June 2010.
Consolidated Q 1 financial performance
Consolidated net sales grew by 27% to Rs.3.52bn from Rs.2.76bn. PBIT (excluding exceptional income) grew by 27% from Rs.390mn to Rs.500mn. While growth was lead by the strong performance of the Indian operations, the overseas subsidiaries particularly Russia and South Africa, besides Sterling Abrasives in the domestic market, and the two Joint Ventures i.e., Murugappa Morgan Thermal Ceramics Ltd and Wendt India Ltd performed strongly to boost the overall performance. About 55% of Company's consolidated sales is from exports & overseas operations.
Profit before tax and exceptional income was Rs.432mn - an increase of 47% over the previous year figure of Rs.295mn. During the quarter, the Company continued on its strategy of divesting non core assets to fund growth. As a result, the profit before tax for the quarter was at Rs. 667mn (previous year Rs.29.5 Crores). Net Profit after tax grew to Rs.435mn (previous year Rs.192mn). Net Profit after tax excluding exceptions was Rs.25.2 Crores (up 31% over previous year Corresponding Quarter).
Consolidated Operating Performance
Abrasives
CUMI's consolidated abrasives sales registered an increase of 19% for the quarter. Sales for the quarter was Rs.148 Crores (Rs.124 Crores for the corresponding period of last year). This growth was made possible by the revival in user industry demand mainly in India and Russia.
Off-take from CUMI witnessed a 12% growth in sales. Off take was strong both in the mass market and in the customer segments. With a view to increase operating margins, product mix was realigned to address higher margin segments. Sales growth was stronger in the bonded abrasives segment as compared to the coated segment, where competition continues to be intense. Exports out of India witnessed a growth of over 46%, primarily driven by the increase in exports to Asian Markets. The strategy of focusing on specific products for the export market has started paying good dividends. The profitability of the Indian operations witnessed an improvement, as a result of the initiatives taken to improve raw material consumption efficiencies, optimizing raw material sourcing and improvement in power and fuel consumption matrices.
Sterling Abrasives, which addresses niche segments in bonded abrasives markets registered a 45% growth in sales. Wendt India, the joint venture with Wendt Gmbh, which addresses the super abrasives market, registered a 72% growth in sales.
In Russia, sales at Rub 118 Million (previous year Rub 69 million), constituted a 70% growth. Growth was driven by improved off-take from auto, auto component and steel markets. Cost of production witnessed an increase primarily on account of increase in cost of grains and power.
The Chinese operations primarily focused on servicing the requirements of thin wheels and combination stones of the Indian and Russian operations and a few customers in Europe and Middle East. The Company is progressing well on its plan of stepping up operating levels and leveraging its presence in China.
Off take from North American customers was generally subdued though there was some improvement in certain market segments. Consequently CUMI America which primarily sells bonded abrasives was able to record an increase in turnover while CUMI Canada which is largely focused on coated abrasives registered lower sales.
Profit before interest and tax of the abrasives business segment, increased by 40% i.e. from Rs.12.2 Crores to Rs.17.1 Crores.
Electro Minerals
The second largest business segment viz. electro minerals continued to ride the growth wave with a robust increase of 41% in sales (Rs.133 Crores vs. Rs.94 Crores).The SBU witnessed sharp increases in input costs across all three geographies, where the company has manufacturing facilities i.e., India, Russia and South Africa.
The Russian operations which addresses the silicon carbide market, recorded a jump of 37% in sales volumes and 33% in turnover. Demand was strong both in the domestic and export markets. Profitability of the business was impacted by the adverse movement of the Euro and increases in cost of power and raw petroleum coke.
The Indian operations did well in all three major product groups viz. silicon carbide, brown fused alumina, white fused alumina. The market for fused minerals was good.The domestic market has been buoyant driven by good numbers in auto and auto ancillaries. The refractory market for steel making is also looking up. This has however been tempered towards the end of the quarter with input cost increases. The prices of brown fused alumina and silicon carbide is expected to increase worldwide.
The Indian operations also address the photovoltaic market's requirements of electro minerals. The market is back strongly after the recessionary trend seen in Europe last year. With increasing interest from economies like US, India, China and Japan, this industry is once again in an investment mode and ramping up capacities.
The joint venture in South Africa, which addresses the international market for fused zirconia, was on a comeback trail. The business which was hit hard in the previous year due to the poor off-take from steel refractory industries, did well during the current quarter, both as a result of revival in business fortunes and also through a conscious effort to extend its range of applications. Sales increased by 42%. Profitability of the business continues to be low as a result of input cost increases and a strong Rand.
Profit before interest and tax of the electro minerals business segment, increased by 8% i.e. from Rs.19.1 Crores to Rs.20.7 Crores.
Ceramics
The ceramics business recorded a 23% increase in sales (Rs.79 Crores vs. Rs.64 Crores).
The high alumina ceramics business performed well. Sales of metalized cylinders is continuing to grow at a brisk pace and demand for ceramic tiles and engineering ceramics has picked up across various markets. Order inflow was good from the North American and Australian markets. CUMI Australia maintained its strong performance at about previous year levels despite increasing competition from imports. The premium quality and brand equity of CUMI products has helped the business to maintain its operating levels in the face of new players competing on price.
Turnover of the Super Refractories and Anticorrosive businesses increased marginally primarily on account of lower sales of Anticorrosive products. Off take from major user industries for Super Refractories products was strong, particularly Iron & Steel, Carbon Black and insulator.
The Company's joint ventures, in the refractory business, viz. Murugappa Morgan Thermal Ceramics Ltd. and Ciria India Limited registered strong performances with a 44% growth in turnover and a 90% increase in profits.
Profit before interest and tax of the Ceramics business segment, increased by 27% i.e. from Rs.12.2 Crores to Rs.15.5 Crores.
Outlook
Order incoming is strong for all businesses. The domestic market continues to look buoyant. The export markets also seem to be gradually looking up with early signs of a revival in international markets. With all the additional capacities that have been created in the last 3 years, the Company is well poised to ride the benefit of an economic revival.