Huhtamaki India (509820) Q4 2006 earnings summary

Executive summary

• 2006 net sales reached Rs.5,012 million, up 15.8% YoY and crossing Rs.5 billion for the first time; volume growth was 13%.

• Growth came amid steep input-cost inflation, customer resistance to price increases, and lingering flood-related disruption at Thane; capacity was unchanged during the year.

• Uttarakhand’s first production line began commercial operations in January 2007, with multiple expansion and modernization projects positioning the business for a larger scale over the next three years.

Financial highlights

• Gross sales rose to Rs.5,795.7 million from Rs.4,984.1 million; net sales increased to Rs.5,012.0 million from Rs.4,328.6 million.

• Operating profit was Rs.431.1 million versus Rs.392.3 million; PBT before extraordinary items was Rs.428.2 million versus Rs.386.9 million.

• PAT was Rs.399.4 million versus Rs.276.8 million; reported PBT included a net flood-insurance gain of Rs.120.8 million.

• EPS excluding extraordinary items rose to Rs.26.73 from Rs.22.71; reported EPS increased to Rs.31.85 from Rs.22.07.

• Cash profit increased to Rs.630 million from Rs.526 million; operating cash flow reached Rs.539 million versus Rs.469 million.

Outlook and guidance

• 2007 was expected to deliver improved financial performance, despite continued margin pressure, particularly in the early part of the year; outlook remained cautiously optimistic.

• Greenfield project completion was scheduled for Q2’07, with optimal capacity utilization expected in H2; its operating-cost impact was expected from Q1’07.

• A specialized-packaging project was scheduled for commercial production by end-Q2’07, and a Hyderabad new-products project was expected on stream by end-Q3’07.

• Planned 2007 capex was Rs.636 million; the full benefits of strategic initiatives were expected from 2008, with a positive long-term outlook.