Sunday, July 22, 2012

Notes From GRP Limited Annual Report 2011-12

Financial Performance
• Sales & other income increased by 31% to 24,928 lacs
• Exports increased by 26% to 16,023 lacs
• PBDT increased by 47% to 4,532 lacs
• Profit before tax increased by 49% to 3,845 lacs
• Net Profit increased by 46% to 2,580 lacs
• EPS increased by 46% to Rs 192.91
• Dividend Rs. 33 per share (Rs. 10 one time)
• Debt to equity ration increased from 0.6 to 0.87
• Market price - 865 to 1620 - PE range based on FY 10-11 EPS - 6.55 to 12.27
Cash Flow
Net cash from Operating activities - 2612 lacs (greater than net profit)
Free Cash flow = 2612 - 4237.04 + 7.41 = -1617.63

Industry Structure
- Recycling of rubber out of waste and scrapped tyres, tubes and other such rubber products. The resultant product, commercially known as reclaim rubber, is a valuable ingredient used by the rubber industry for making various products by part replacement of virgin rubber.
Total rubber consumption for India is expected to reach 1.49 million tonnes and 1.64 million tonnes in years 2012 and 2013 respectively.
To meet this demand of rubber, natural & synthetic rubber source will not be sufficient. There are predicted shortages in availability on account of climate change (which is reducing yields of natural rubber plantations) and shortages in key ingredients like butadiene (which is a key raw material for production of commodity rubbers such as PBR, SBR, among others). With no short term solutions , reclaim rubber, at approximately 30-50% of virgin rubber prices and with 50% rubber content, is the best alternative to counter the supply constraints of virgin rubbers.
While historically the usage of reclaim in India as a percentage of virgin rubbers has been around 8%, the penetration has been rising and the Company is aggressively developing new grades to increase the usage of reclaim.

recessionary trends in Europe and weakening demand in the second half of the year.
An extremely volatile currency scenario, coupled with depressed prices of virgin rubbers led to substantial swings in margins on a monthly basis.
A high industrial inflation mainly on account of energy cost increases, pushed up input costs particularly during the last quarter of the year.
On December 30, 2011, there was a major fire at Company’s plant located at Akkalkot Road, Solapur, leading to loss of approximately 1000 tons of production.
Foreign exchange fluctuation could also pose a threat particularly at the time of repayment of foreign currency loans. However, Company’s export sales are about 67% of total turnover, which provides natural hedge against exchange risks.
The performance of the company in the industrial polymers and custom die forms business has been steady, yet continues to be promising. Capacity addition in these businesses has been steady and the businesses have become self reliant in the financial year 2011-12.
The export presence of the company continues to grow with exports now contributing 67% share of the total sales value of reclaim rubber.
While Europe continues to remain in recession mode, the Company has been able to spread its presence in other geographies, thereby continuing to maintain its leadership position across the world.
The domestic markets are going through an exciting phase, with new tyre capacity additions by domestic tyre majors and the entry of multinational tyre companies. The anticipated growth in the tyre capacity in India combined with the Company’s thrust in new geographies shall ensure that new capacities being commissioned in the current financial year shall find suitable end use.
The Company has set up new plant at Chincholi, Solapur and first phase was fully operational in the financial year 2011-12. Second phase has been partially commissioned during the financial year 2011-12 and will be fully operational in current financial year.
With bulk of new tyre capacities being commissioned in South India, the company has also set up new plant at Perundurai, Tamilnadu for the production of reclaim rubber, which started production in March, 2012 and will be fully operational in current financial year. The above two expansions would add approximately 25% more capacity compared to March 2012.
In spite of increased borrowings for new project, the Company has managed its funds well and maintained interest cost at 2% of the turnover.
- Chairman - K M Philip- The only 100 year old chairman in the country !!!
The company is focussing on sales of synthetic rubber reclaims which command higher value and realisation compared with the natural rubber based reclaims.

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