Usha Martin (517146) Q4 97/98 earnings summary

Executive summary

• FY97-98 marked a major merger and restructuring year; reported results include six months of Usha Martin Industries operations and are not comparable with FY96-97.

• Cost reduction, backward integration and higher-value products became central priorities amid weak steel demand and falling prices.

• Reported turnover was Rs 499.03 crore, profit after tax Rs 33.70 crore and cash flow Rs 60.26 crore.

Financial highlights

• Sales and other income were Rs 52,317 lakh vs Rs 27,828 lakh; profit before tax Rs 3,822 lakh vs Rs 2,458 lakh; PAT Rs 3,370 lakh vs Rs 1,608 lakh.

• EPS was Rs 14.67 vs Rs 12.57; cash earnings per share was Rs 26.30 vs Rs 22.82. Periods are not comparable due to the merger.

• Board recommended a 50% equity dividend, or Rs 5 per share, and preference dividends for FY97-98.

• Profit included a non-recurring Rs 1,907.18 lakh gain on sale of long-term investments; Rs 750 lakh was provided for contingencies.

Outlook and guidance

• FY98-99 profit was expected to exceed FY97-98, supported by higher throughput, rope value addition and cost reductions across divisions.

• Cost-saving initiatives were expected to save Rs 5 crore in FY98-99, with savings expected to double in the following year.

• Wire sales were projected at 21,000 tonnes in FY98-99 vs 15,000 tonnes in FY97-98; exports were targeted to rise to 15% of turnover from 12%.

• Specialized ropes were targeted to reach half of output within two years; management expected a fuller impact from initiatives in FY99-2000.