Garware Hi-Tech Films (500655) Q4 05/06 earnings summary

Executive summary

• FY06 net profit fell 72.47% YoY to Rs 565.58 lakh, including a Rs 41.71 lakh prior-year tax refund; pressure came from higher oil-linked inputs and domestic oversupply.

• Export sales grew 3.80% to Rs 246 crore, supported by Sun Control film volumes and improved realizations; total gross sales declined 5.37% to Rs 846 crore.

• Focus shifted toward exports and value-added films to mitigate commodity-market pressure and support future margins.

Financial highlights

• Net sales were Rs 80,966.36 lakh, down 4.45% YoY; other income rose 18.20% to Rs 436.66 lakh.

• Profit before interest, depreciation and tax declined 22.39% to Rs 8,615.56 lakh; PBT fell 69.61% to Rs 1,081.79 lakh.

• PAT fell 74.50% to Rs 523.87 lakh; net profit after a Rs 41.71 lakh prior-year tax refund was Rs 565.58 lakh, down 72.47%.

• EPS was Rs 2.59 versus Rs 9.41 in FY05; no dividend was recommended to conserve resources for lender commitments.

Outlook and guidance

• Polyester-film demand was forecast to grow 8–10% annually internationally and 12–15% domestically; domestic prices appeared to be firming as supply-demand conditions improved.

• New-product response was encouraging; priorities included R&D and value-added products in remunerative markets, with expansion in China, Brazil, Japan and Australia.

• Margin pressure was expected to persist until oil and major raw-material prices stabilized at reasonable levels.