Welspun Corp (532144) Q4 09/10 earnings summary

Executive summary

• FY10 consolidated revenue rose 28% YoY to Rs. 73,503 mn; EBITDA nearly doubled to Rs. 13,186 mn and PAT reached Rs. 6,104 mn.

• Pipe and plate volumes, improved realizations, better raw-material management and the US plant supported growth; consolidated EBITDA margin increased to 17.94% from 11.06%.

• Growth plans included 550 KMT of Indian pipe capacity additions, a proposed Middle East facility and entry into infrastructure and pipe laying through MSK Projects.

Financial highlights

• Consolidated operating revenue was Rs. 73,503 mn vs Rs. 57,395 mn in FY09; EBITDA was Rs. 13,186 mn vs Rs. 6,348 mn and EBIT was Rs. 11,126 mn vs Rs. 4,915 mn.

• Consolidated PAT was Rs. 6,104 mn vs Rs. 2,135 mn; EPS was Rs. 31.69 basic and Rs. 28.40 diluted, compared with Rs. 11.51 and Rs. 11.43, respectively.

• Operating expenses were Rs. 60,317 mn, 82.0% of revenue vs Rs. 51,048 mn, 89.0%; cost of goods sold declined to 64.6% of net sales from 69.7%.

• Operating cash flow was Rs. 3,821 mn vs Rs. 13,195 mn; investing cash outflow was Rs. 3,863 mn and financing cash inflow was Rs. 2,767 mn.

Outlook and guidance

• Order book stood at Rs. 64,300 mn (US$1.3 bn) as of 27 April 2010, with ~90% export orders; management cited improving demand in the US, Europe and Middle East and participation in bids globally and domestically.

• Planned Rs. 7 bn expansion adds 350 KMT LSAW and 200 KMT HSAW capacity in India; commercial production was targeted by end-FY11, with the first water-pipe mill expected in H1 FY11.

• Proposed Middle East investment would add 270 KMT HSAW capacity; combined pipe capacity after planned additions was projected at 2.27 MMT.

• Plate demand remained challenged by weak shipping and construction markets; external plate orders and rising internal plate and coil consumption were expected to support volume growth.