Welspun Living (WELSPUNLIV) Q4 05/06 earnings summary

Executive summary

• FY06 sales rose 37% to Rs 6,537.34m; reported PAT increased 8% to Rs 415.49m, while EPS fell to Rs 5.25 from Rs 5.70.

• Capacity expansion at Anjar drove higher towel and bed-linen output, but new-capacity underutilization and sharp increases in power and fuel costs constrained profitability.

• Growth strategy centered on a Rs 12.5bn FY05–FY07 capex program, overseas brand acquisition, wider product mix and expansion in domestic retail.

Financial highlights

• Standalone sales were Rs 6,537.34m versus Rs 4,763.10m; PBT was Rs 632.81m versus Rs 606.33m, and PAT was Rs 415.49m versus Rs 385.80m.

• Standalone reported EBITDA was Rs 1,462.08m, up 27.22%; cash profit increased 38.4% to Rs 902m.

• Consolidated revenue was Rs 6,734.92m and net profit Rs 405.38m; consolidated EPS was Rs 5.11 versus Rs 5.85.

• Export sales were Rs 5,503.37m and export benefits Rs 220.77m; total exports including benefits were Rs 5,724.14m on the standalone geographic segment basis.

Outlook and guidance

• Phase I of the Anjar project was complete; Phase II was expected by FY07-end, with commissioning planned across towels, bed linen, spinning and decorative bedding.

• Higher Phase I utilization and Phase II commissioning were expected to lift sales and contribution; management anticipated improved cost-to-sales ratios in the current year.

• Bed linen was expected to reach 30% of revenue over four years; retail was expected to contribute significantly from FY07.

• Phase II was estimated at Rs 6,500m, funded by Rs 1,650m equity, Rs 4,750m TUF debt and Rs 100m internal accruals.