Huhtamaki India (509820) Q4 2008 earnings summary

Executive summary

• FY2008 net sales rose 15% YoY to Rs 6,120.9 mn; PBT before exceptional items fell 19.5% to Rs 297.7 mn, and PAT declined to Rs 212.9 mn from Rs 283.7 mn.

• Cash generation strengthened despite earnings pressure: operating cash flow was Rs 649.5 mn vs Rs 305.3 mn in 2007; debt-equity improved to 0.20:1 from 0.27:1.

• Key pressures were a Rs 132 mn FX loss, sharply higher raw-material costs and Q4 inventory reductions across the supply chain.

Financial highlights

• Gross sales increased to Rs 6,747.5 mn from Rs 6,027.9 mn; net sales reached Rs 6,120.9 mn, up 15% YoY on the recast external-sales basis.

• Operating profit was Rs 307.5 mn vs Rs 386.9 mn; EBDIT was Rs 594 mn, or Rs 726 mn excluding the Rs 132 mn FX loss.

• PBT before exceptional items was Rs 297.7 mn vs Rs 369.6 mn; PAT was Rs 212.9 mn vs Rs 283.7 mn, and EPS was Rs 3.40 vs Rs 4.53.

• Q4 sales were flat YoY and 13% below Q3 sequentially; Q4 PBT was Rs 61.5 mn vs Rs 61.2 mn in Q3.

• Total operating expenses were 24.8% of net sales vs 25.9% in 2007; raw-material costs rose to 69.6% of sales from 69.0%.

Outlook and guidance

• 2009 visibility remained poor amid the downturn; the Q4 inventory correction continued into early 2009, with management expecting it to unwind by Q1 or before Q2.

• FY2009 capex was planned at Rs 311 mn, including Thane reconstruction and ERP; maintenance spending was to remain tightly controlled.

• Priorities were customer service, cost efficiency, cash conservation, creativity and team cohesion; the medium- and long-term Indian consumer-packaging outlook remained positive.

• Export growth, new applications and Huhtamaki Group synergies were expected to support growth, while actual results remained subject to economic and market uncertainty.