BETTER synergies generated after the acquisition of subsidiaries helped Sintex show a flat consolidated performance during the quarter to December ‘09, although on a standalone basis, its performance was weak.
The company’s profits for the quarter dipped 11.3% on a standalone basis to Rs 55.9 crore, but the consolidated numbers at Rs 72.8 crore were 1.5% higher compared with the year-ago period.
Sintex had acquired six companies over the past couple of years – two in the US, one in France and three in India. The overseas subsidiaries had been hit hard by the economic turmoil over the past 18 months, but have now started looking up. However, following the company’s failed attempt at acquiring Geiger Tech in Germany, which filed for bankruptcy, Sintex is likely to write off its initial investment of E7 million (approx Rs 46 crore) during the current financial year. For the December quarter, the company reported a 3.4% growth in consolidated net sales to Rs 848 crore. However, rising raw material costs impacted its operating margin leading to a situation where its PBDIT is now below the year ago level. The company shaved off close to one-thirds of its interest costs by replacing high cost loans, which helped its pre-tax profit inch up 3.5% to Rs 98.8 crore.
Its textiles business grossly underperformed during the quarter with a 6% dip in sales and 67% fall in profits. In comparison, the plastics segment performed well with a double-digit profit growth against the year-ago period.
Sintex Industries’ December 2009 quarter financial performance failed to impress investors, as its shares dipped 0.8% to close at Rs 269 on BSE. The scrip, which has underperformed the Sensex during the past year, is now being valued at 12 times its consolidated earnings for the past 12 months. The company reported improving capacity utilisation rates across businesses, which can help boost higher revenues, going forward. With over one-thirds of its annual profits typically generated in the last quarter, the March 2010 quarter numbers could be substantially better.
The company is also carrying a war chest of around Rs 1200 crore of cash, initially raised to fund an acquisition, which could add an unexpected boost to growth.
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