SRF (SRF) Q4 01/02 earnings summary

Executive summary

• FY2001-02 sales turnover declined 5.6% and net profit fell 22.4%, amid domestic transport weakness and a depressed global business environment.

• Like-for-like operating profits improved only marginally despite higher volumes; lower Nylon Tyre Cord prices compressed conversion margins, while lower interest costs largely maintained PBT.

• Portfolio restructuring separated Polyester Films, Fishnet Twine and Engineering Plastics into SRF Polymers, while Tyrecord Fabric was merged into the continuing operations.

• Strategic priorities shifted toward customer focus, process-based operations, lower leverage, global growth in core businesses and development of IT-enabled services.

Financial highlights

• Gross sales were Rs 750.70 cr versus Rs 795.37 cr in FY2000-01; PBIDT was Rs 138.20 cr versus Rs 147.09 cr.

• PBT was Rs 37.04 cr versus Rs 37.44 cr; PAT fell to Rs 27.28 cr from Rs 35.15 cr, including Rs 7.82 cr deferred tax liability under AS-22.

• Interest expense declined to Rs 54.72 cr from Rs 69.36 cr; depreciation rose to Rs 46.44 cr from Rs 40.29 cr.

• EPS was Rs 4.23 versus Rs 5.45; a 20% equity dividend, or Rs 2 per share, was recommended.

Outlook and guidance

• Management expected the business downturn to have bottomed out; subdued new capacity and incremental demand were expected to tighten supply-demand balances and support pricing power.

• Industrial Synthetics planned Asian acquisitions and alliances, targeting triple existing capacity and a top-three global position within five years.

• Industrial Fabrics aimed to grow exports, add customers and geographies, improve cost competitiveness, and expand into higher-value coated-fabric applications.

• Chemicals plans included replacement gases, HFC-134a development, expanded distribution and contract manufacture/custom synthesis; IT services targeted BPO, including healthcare billing.