Thangamayil Jewellery (THANGAMAYL) Q4 14/15 earnings summary

Executive summary

• FY15 sales and other operating income rose 19% to ₹142,283 lakh, while net loss widened to ₹2,228 lakh from ₹1,257 lakh, primarily due to falling gold and silver prices and weak rural demand.

• Higher sales volumes, improved stock rotation and reduced working-capital borrowing supported operations, but did not offset inventory-realization losses and higher borrowing costs.

Financial highlights

• Revenue from operations was ₹142,126 lakh versus ₹119,130 lakh YoY; gross profit fell 35% to ₹5,327 lakh from ₹8,236 lakh.

• EBITDA was ₹441 lakh versus ₹1,959 lakh; PBT loss was ₹3,298 lakh versus ₹2,077 lakh, and PAT loss was ₹2,228 lakh versus ₹1,257 lakh.

• Excluding the ₹3,840 lakh adverse gold and silver price movement, gross profit on a metal-to-metal replacement basis was ₹9,167 lakh; cash profit after expenses including interest was ₹1,367 lakh.

• Gold and silver price declines reduced inventory realization; gold fell 11% during the year and silver fell 30%.

Outlook and guidance

• FY16 outlook was described as moderate; stable gold prices were expected to support demand, while rural wage weakness and subdued real estate activity remained headwinds.

• Targets included improving stock rotation from 5x to 6x, raising manufacturing capacity utilization from 55% to 75%, and moving all 30 outlets to break-even performance.

• Plans included improved inventory management, product mix, pricing and cost control, plus deleveraging and greater own manufacturing to reduce financing and production costs.

• Management aimed to cover at least 60% of gold inventory through metal loans and customer gold, subject to wider lender restoration of metal-loan facilities.