Carborundum Universal has posted strong fiscal results, cut its debt and plans to expand further by investing over Rs200 crore

Moneylife Digital Team

Carborundum Universal (CUMI) has decided to spend Rs200 crore on its capacity expansion plans. Consolidated net sales for the 2012 fiscal grew by 24%, to Rs1,969 crore, when compared to last year, has compelled the company to expand further. The overall results were driven by strong sales of its largest segment, abrasives, which grew more than 20%, from Rs690 crore to Rs831 crore. Likewise, its second largest business segment, electro minerals, grew from Rs598 crore to Rs727 crore, an increase of 21.57%. This was helped by robust performance of its Russian operations. The operating profits (EBITDA) grew by 29%, from Rs312 crore to Rs402 crore over the course of the 2012 fiscal. Its operating profit margins grew by to 20.42% from 19.60%, indicating margin expansion to the tune of 82 bps.

While its fiscal results were strong, its fourth quarter results were lacklustre, owing to economic conditions over the last three months. Net sales for the quarter ended in March 2012 increased only by 1.09% to Rs523.42 crore, year on year. Its operating profits barely budged and move up only 1.18%. Despite these, its net profits grew strongly, by 14.01% to Rs55.54 crore.

The stock is currently quoting at Rs158, with a market capitalisation-operation profit ratio of 3.68 and a price earnings ratio of 13.67, indicating that growth factors have not been factored in yet.

The company has also managed to reduce its debt-equity ratio from 0.33 to 0.22, an impressive reduction, aided by repaying off long-term debts of Rs41.32 crore. The capacity expansion coupled with reducing debt is a sign of confidence.

The overall results are very good, considering the volatile economic conditions over the last one year. CUMI has been a leader in the abrasives segment for quite a long time now. This is a good sign, as it is not straying from what it is good at. It is now beefing up its core operations further, by investing in capacity expansion as well as a new greenfield plant to meet additional requirement of fired and castable refactories. Refactories are mainly used for ceramics as well as industrial process of manufacturing of fertilisers and cements. It is also used for glass-making and foundries. Earlier, it had invested in Russia and South Africa plants, and the same is expected to be completed this year. It is already a leader in the vitrified bonded abrasives category in Russia.

CUMI is part of the Murugappa Group, one of the biggest conglomerates in south India, that includes cycle manufacturer Tube Investments of India, Coromandel International, EID Parry, Parry Agro Industries to name a few. Carborundum Universal has been delisted from Madras Stock Exchange. However, it continues to be traded National Stock Exchange and Bombay Stock Exchange.