Usha Martin (517146) Q4 00/01 earnings summary

Executive summary

• 15-month results to 31 Mar 2001: turnover Rs 1,132.64 cr and post-tax profit Rs 48.81 cr; prior comparison covers 9 months, so periods are not strictly comparable.

• Focus returned to steel, wire and wire ropes, and telephone cables following the demerger of IT and knowledge-based businesses.

• Cost control, higher value-added steel, capacity expansion and wider export markets supported the strategy amid a sluggish economy and weak steel conditions.

Financial highlights

• Sales and other income Rs 113,264.48 lakh; profit before depreciation and tax Rs 11,178.88 lakh; PBT Rs 5,280.88 lakh; PAT Rs 4,880.88 lakh for 15 months.

• Tax provision was Rs 400 lakh; profit brought forward Rs 2,991.65 lakh, leaving Rs 7,872.53 lakh available for appropriation.

• Other income included an extraordinary Rs 2,537.51 lakh gain on sale of long-term investments and Rs 402.97 lakh gain on sale of marketing and distribution rights.

• Proposed equity dividend Rs 2.50 per fully paid Rs 5 share for the 15-month period.

Outlook and guidance

• Management targeted personnel and administration costs below 8.5% of turnover in FY 2001-02, with a longer-term target of 6%; the directors’ report cited a 7% target within two years.

• Steel output was expected to rise; full benefits from expansion facilities were expected from Sep 2001, supporting higher-end speciality steel.

• Planned steel raw-material and power initiatives aimed to reduce variable steelmaking cost from $210 to $185 per tonne.

• Wire-rope output target rose from 45,000 to 60,000 tonnes; management expected international expansion to strengthen results over the following 24 months.

• Management targeted topline growth of ~25% without corresponding fixed-cost growth, debt-equity reduction from 1.7 to 1.2 and ROCE of 11.5%.