Garware Hi-Tech Films (500655) Q4 06/07 earnings summary

Executive summary

• FY07 gross sales rose 7.5% to Rs. 90,925.47 lakh, but net profit fell 62.4% to Rs. 212.55 lakh and EPS declined to Rs. 0.97.

• Domestic sales grew 12%, while exports declined 3%; pricing pressure and higher crude-linked raw-material costs constrained margins.

• Polyester-film demand prospects improved, with new products and value-added Sun Control Film segments positioned as growth drivers.

Financial highlights

• Gross sales Rs. 90,925.47 lakh, up 7.5%; net sales Rs. 52,372.02 lakh, up 6.7% YoY.

• Operating profit before interest, depreciation and tax was Rs. 8,256.47 lakh, down 4.2%; PBT fell 52.7% to Rs. 511.96 lakh.

• PAT declined 59.4% to Rs. 212.55 lakh; net profit, after prior-year tax refund, fell 62.4% to Rs. 212.55 lakh.

• Interest and financial charges rose 3.0% to Rs. 4,630.06 lakh; depreciation increased 2.5% to Rs. 3,114.45 lakh.

• No dividend was recommended to conserve resources; operating cash inflow was Rs. 11,130.28 lakh versus Rs. 2,138.83 lakh in FY06.

Outlook and guidance

• Polyester-film demand was estimated to grow 6% p.a. internationally and 15% p.a. domestically; demand/supply conditions were showing a positive trend and prices appeared to be firming.

• Sun Control Film exports reached 52 countries; focus markets included the US, EU, Australia, Russia, Far East and Middle East.

• New products, niche segments, car kits and OEM tie-ups were expected to support growth and improve gross margins; China, Mexico and Far East were targeted for market development.

• Growing automobile production and building-industry demand were cited as prospects for Sun Control, safety and security films, particularly in emerging markets.