SOMANY CERAMICS Ltd - RESULTS FOR - Q2 FY 2013 - Q/E SEP,2012 - NET SALES UP 24%; NET PROFIT UP 39.48% YoY - ANNUAL REPORT SUMMARY 2011-12 - FUTURE PROMISING

SOMANY CERAMICS LIMITED

RESULTS FOR Q2 FY 2013

Q/E SEP,2012

SOMANY CERAMICS LIMITED has produced a very good set of results for the second quarter ending Sep,2012.

Net Sales for Q2 FY 13 ending Sep,2012 stands at Rs.256.62 Cr;  up by 35.29% from Q1 FY 13 (Rs.189.68 Cr); and up by 23.71% from Q2 FY 12 (Rs.207.44 Cr);

Total Expenditure for Q2 FY 13 ending Sep,2012 stands at Rs.241.54 Cr;  up by 36.06% from Q1 FY 13 (Rs.177.53 Cr); and up by      24.27% from Q2 FY 12 (Rs.194.36 Cr);

Profit  before Intt, Dep. & Taxes for Q2 FY 13 ending Sep,2012 stands at Rs.15.08 Cr;  up by          24.12% from Q1 FY 13 (Rs.12.15 Cr); and up by       15.29% from Q2 FY 12 (Rs.13.08 Cr);

Net Profit  for Q2 FY 13 ending Sep,2012 stands at Rs.8.02 Cr;  up by 52.18% from Q1 FY 13 (Rs.5.27 Cr); and up by        39.48% from Q2 FY 12 (Rs.5.75 Cr);

Diluted EPS for Q2 FY 13 ending Sep,2012 stands at Rs.2.32 ;compared to Rs. 1.53in Q1 FY 13; and Rs.1.67 in Q2 FY 12.

CURRENT MP : 69.20

52 week high/low price : 71.90/28.80

More Details are in the Table below :

TABLE

SOMANY CERAMICS	30-Sep-12	%DifQoQ	30-Jun-12	%Dif YoY	30-Sep-11	31-Mar-12	31-Dec-11
Net Sales	25662	35.29	18968	23.71	20744	27586	21693
Total Expenditure	24154	36.06	17753	24.27	19436	25777	20469
Profit  before Intt, Dep. & Taxes	1508	24.12	1215	15.29	1308	1809	1224
Net Profit	802	52.18	527	39.48	575	846	473
Diluted EPS	2.32	51.63	1.53	38.92	1.67	2.45	1.37
Net Sales	25662	35.29	18968	23.71	20744	27586	21693
Changes in inventories of FG,SIT,WIP	597	-124.44	-2443	-208.15	-552	2361	-566
Cost of materials	7491	-6.06	7974	12.66	6649	7720	7279
Purchases of SIT	10971	45.45	7543	25.54	8739	10515	9061
Employee benefits	1822	2.24	1782	11.51	1634	1700	1687
Depreciation	500	2.46	488	13.64	440	483	468
Other expenses	2773	15.11	2409	9.78	2526	2998	2540
Total expenses	24154	36.06	17753	24.27	19436	25777	20469
Profit before tax	1163	47.59	788	40.12	830	1253	711
Tax Expenses	361	38.31	261	41.57	255	407	238
Net Profit	802	52.18	527	39.48	575	846	473
Face Value(Rs )	2	0	2	0	2	2	2
Paid-up Equity	690	0	690	0	690	690	690
Basic EPS	2.32	-19.16	2.87	38.92	1.67	4.09	1.37
Public holding (%)	36.69	0	36.69	0	36.69	36.69	36.69

COMPANY PROFILE

Somany Ceramics with the plants in Kadi (Gujarat) and Kassar (Haryana), with the production capacity of 20 million square per annum is the producer of the highest quality of ceramic glazed tiles, vitrified tiles, sanitary ware or porcelain floor tiles. Somany started off with a clear distinctive position, that of being strong, durable and effectively close to the heart.

Since its inception in 1969 as Somany Pilkington's, it was his dream of establishing the closest connect with its patrons that Shri H. L. Somany strived to realize. This dream did not only drive the company towards the path of unparalleled success, but also established its presence as an unchallenged leader in the Indian tiles sector.

With Shri H. L. Somany at the helm as Founder, Shri Shreekant Somany as the CMD and Shri Abhishek Somany as the JMD, the company is heading towards an exciting phase of expansion and growth.

ANNUAL REPORT 2011-12 - SUMMARY

Somany Ceramics embarked on strategic acquisitions to expand its product range without investing in new equipment and improving its market penetration without spending years in product development - through the following initiatives:

• VTPL: Acquired a 26% equity stake in Gujarat-based Vintage Tiles Private Limited for Rs.5.03 crores providing us with a complete access to VTPL’s manufacturing capacity (2.65 mn sqm per annum of polished vitrified tiles) from January 2012 leading to projected annual turnover of Rs.80 crores.

• CVPL: Entered into an MOU to acquire 26% equity stake (with an option to increase it to 51%) in Gujarat-based Commander Vitrified Private Limited (CVPL) for Rs.3.25 crores to procure and sell CVPL’s production capacity of 2.65 mn sqm per annum of polished vitrified and glazed vitrified tiles from June 2012 leading to projected annual turnover of Rs.100 crores.

The result: Tile production capacity increased from 19.15 mn sqm to 24.45 mn sqm p.a. for an investment which was 80% less than the greenfield alternative. This will potentially generate annualised turnover of about Rs.180 crores with a projected payback of about 3 years as against a prevailing greenfield payback of around 10 years .Enabling us to stay ahead of the curve.

Refined  the product mix to enhance profits and reinforce business sustainability through the following initiatives:

• Increased the overall sale of medium and high end products from 34% in 2010-11 to 55% in 2011-12

• Increased sales derived from the in-house production of value-added tiles from 33% of our product mix in 2010-11 to 58% in 2011-12, strengthening our margins

• Introduced new ranges in our existing basket of value-added products

• Introduced new value-added products like Duragres VC 50 and Digital Tiles All these initiatives resulted in an increase in our average realisation per sqm from `259 in 2010-11 to `284 in 2011-12.

5 years growth

Particulars	2007-08	2008-09	2009-10	2010-11	2011-12
Share Capital	690	690	690	690	690
Reserves	4,939	5,692	7,495	9,557	11,711
LoanFunds	15,005	13,725	16,223	19,122	18,097
GrossBlock	27,796	27,789	31,454	35,274	38,642
NetBlock	13,834	13,002	15,384	17,592	19,397
Investments	79	81	173	172	595
CurrentAssets	14,836	17,600	24,758	29,502	32,071
CurrentLiabilities	5,595	8,058	13,587	15,825	19,259
NetCurrent Assets	9,241	9,542	11,171	13,677	12,812
Turnover	35,143	46,277	56,302	75,178	92,303
OtherIncome	118	158	292	497	201
ExciseDuty	2,207	2,068	2,608	4,120	5,074
MaterialCosts	9,727	11,016	10,473	12,746	15,318
EnergyCosts	4,183	6,365	6,311	8,683	10,917
EmployeeCosts	2,754	3,333	4,328	5,431	6552
MfgAdmnSel.Exo	12,603	19,300	27,042	37,885	47187
EBIDTA	3,786	4,354	5,832	6,810	7,456
Intt&Fin Costs	1,693	1,603	1,329	1,712	2,065
EBDT	2,093	2,751	4,503	5,098	5,391
Depreciation	1,345	1,404	1,447	1,727	1,822
PBT	748	1,347	3,056	3371	3,569
Tax	342	473	1,010	1,028	1,094
PAT	406	874	2,046	2,343	2,475
Networth	5,629	6,382	8,185	10,247	12,401
Capital	23,154	22,625	26728	31,935	33,033
EPS	1.18	2.53	5.93	6.79	7.17
BV/Sh	16.32	18.5	24	30	36
Dividend/Share(%)	0.2	0.3	0.6	0.7	0.8
RONW	7.43	14.55	28.09	25.42	21.86
ROCE	11.25	12.89	17.77	17.33	17.34

BUSINESS REVIEW

Turnover:  improved 22.89% from Rs.749.54 crores to Rs.921.10 crores, owing to robust growth of outsourced manufacturing by 26.7% and own manufacturing by 19.1%.

Profits: Operating profits improved from Rs.50.83 crores to Rs.56.34 crores while EBIDTA margins declined by 104 bps from  9.61% to 8.57%, following an increase in raw material costs, power and fuel costs and limited ability to pass these cost increases to consumers due to competitive pressures. Our net profit grew marginally by 5.63% from Rs.23.43 crores to Rs.24.75 crores.

Outperformance

In 2011-12, we outperformed the industry growth by a factor of around 2x by undertaking a number of initiatives:

Strategic capacity expansions:  Expanded our capacity 13.84% to 21.80 mn sqm against 19.15 mn sqm in 2010-11 through the inorganic route by acquiring 26% stake in Morbi (Gujarat) based Vintage Tiles Private Limited (VTPL) for a consideration of `5.03 crores. This strategic stake will allow us to have complete access to VTPL’s production of 2.65 mn sqm of polished vitrified tiles a year. We plan to double the production capacity of this plant at the earliest opportunity.

Branding and networking: Strengthened distribution network through the net addition of 156 dealers (total 1490), representing an entry barrier for newcomers. By adding more franchisee showrooms during the year, the number of Somany Exclusives/Studios and Duragres Studios was 75 and 35 respectively at the year end. We enhanced our visibility by participating in a prestigious international exhibition ‘Cevisama’ in Spain, three national level and seven state level exhibitions.

Launched innovative products: Entered into a marketing and distribution arrangement with Italian company IRIS Ceramiche and FMG (FioranoModenese-MO) of GranitiFiandre Group (Castellarano-RE) to market its ‘Active’ range of tiles using the Active technology with selfcleaning properties to degrade nitrogen oxides in the atmosphere and improve air quality. Through this partnership, we expect to enhance our commitment to introduce green technologies in the ceramic space. 

Technological innovation: We introduced the revolutionary digital printing technology, elevating surface design and finish to a new level. We invested `12.80 crores to install three digital machines in our Kadi and Kassar units. The digital technology reconciles unlimited design combinations, sharper finishes and stunning tile artwork. These tiles can be customised as per user requirements as the digital printing technology allows an impression to be lifted off a photograph or replicate the visual essence of natural products like wood, stone and marble, retaining the natural finish. The digital tiles were launched in the second quarter of the year under review; they constituted 3.25% of the total tile production and contributed `29.25 crores to total turnover. The full benefit of the machines will come in FY 2012-13, putting us in a formidable position to reap the benefits of value-addition.

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