Recommendations » India

Finolex Cables Q3FY13 results update

Contributed by Nirmal Bang

Finolex Cables Ltd (FCL) reported revenue of Rs 534.3 cr for the quarter, a growth of 7.0% yoy led by Electrical cables (contributing 68% of revenue) which saw a lower growth of 12.3% yoy in Q3FY13 as compared to 21.4% and 24.7% yoy growth seen in Q1FY13 and Q2FY13 respectively, which was mainly on account of lower demand from Auto and Infra sectors.

Electrical Cables contributed 68% to the gross sales, Communication Cables contributed 6.7%, Copper business 19.7% and the rest was from Others. EBITDA for the quarter was Rs 43 cr, up 4.0% on a yoy basis. EBITDA margin came lower at 8.0% in Q3FY13 as compared to 12.0% in Q2FY13 and 8.1% in Q3FY12 on account of higher ad spend of Rs 8 cr during the quarter and a oneoff gain in the Communication cables division in Q2FY13.

PAT for the quarter was Rs 24 cr, up by 75.0% yoy aided by lower forex losses (loss of Rs 2.3 cr as compared to a loss of Rs 7.9 cr in Q3FY12). PAT margin saw a improvement of 180 bps yoy to 4.5%. From Q4FY13 onwards, FCL is not expected to post any major forex loss since all its derivatives contracts expire.

Electrical Cables business continued with its double digit growth of 12.3% yoy. Communications Cables business witnessed improvement with revenues growing by 13.1% yoy. Copper business continues to remain under pressure and registered a de-growth of 11.1% yoy. Others registered a 22.3% growth yoy.

Electrical cables division margins saw a marginal dip of 40 bps yoy, and was lower than 12.2% witnessed in Q2FY13. Communication Cables business witnessed a significant improvement in its PBIT margins which clocked 11.8% for the quarter as compared to sub 8% margins in the previous quarters, but it was lower than 19.1% margin in Q2FY13 (which was exceptional on account of a large BSNL order). Margins are expected to remain in the 9-11% range in the coming quarters in this segment. Copper rods business margins remained stable in the quarter.

FCL is setting up a captive 5 MW solar power plant at its manufacturing facility at Urse, Pune at a cost of Rs 40 cr. This will help reduce power cost by 20%. We have revised our FY14E sales downwards by 2% on account of slower growth expected in the Electrical Cables segment due to slowdown in the auto and infra segments.