Usha Martin (517146) Q4 96/97 earnings summary

Executive summary

• Sales rose 55.94% to Rs 511.31 crore in FY1996-97, while profit after tax fell 48.73% to Rs 12.54 crore amid depressed steel prices, higher power costs and production losses during plant stabilisation.

• Operations consolidated around integrated steelmaking and wire products; management prioritized cost reduction, higher utilisation, value-added products and export growth.

Financial highlights

• Sales were Rs 511.31 crore versus Rs 327.89 crore; total income was Rs 513.47 crore versus Rs 331.80 crore.

• Profit before tax declined to Rs 14.63 crore from Rs 24.46 crore; profit after tax was Rs 12.54 crore versus Rs 24.46 crore.

• EPS fell to Rs 2.55 from Rs 6.07; proposed equity dividend was 15%, versus 27% in each of the prior three years.

• Export turnover reached Rs 96.12 crore, up 30% YoY, and represented 18.80% of turnover.

Outlook and guidance

• FY1997-98 turnover target was Rs 650 crore; management expected higher profits and cited Q1 sales 16% above the year-earlier period, with growth expected to accelerate in Q3 and Q4.

• Cost-cutting targets were Rs 800 per tonne in the operating review and an additional Rs 500 per tonne in the cost-cutting discussion; output targets were 5% more pig iron and 40% more wire rods and ropes using existing assets.

• Management planned to convert more wire rods into higher-value wires and ropes, improve product mix and increase exports in FY1997-98.

• Plans included tapping external commercial borrowings up to $50 million, subject to required approvals, to restructure financing costs.