Samtel Q2FY2007 revenues up 35% at Rs.3431 million

Samtel Q2FY2007 revenues up 35% at Rs 3431 mn

Lines 4 and 5 commence operations, Q2FY2007 sales volume up 27%

Price environment stabilizes; new lines to cash break-even by Dec.’06

Growth outlook driven by:

• Better business environment, stable price outlook, and encouraging traction in both domestic and global markets
• Combined benefits of all five lines
• new lines expected to achieve cash break-even by Q3FY07 and contribute fully from Q4FY07
• total annual capacity rises to 10 million tubes
• domestic market share up significantly

New Delhi, Oct. 28, 2006: Samtel Color Limited (Samtel), the largest integrated manufacturer of Colour Picture Tubes (CPT) for television sets in India, today announced its results for Q2 & H1FY2007.

Commenting on the performance, Mr. Satish Kaura, Chairman and Managing Director, Samtel Color Limited, said: "This has been an operationally robust quarter, with our performance reflecting our enhanced capacities and increased market share. We are also witnessing a significant improvement in market conditions. Strong demand for picture tubes combined with decommissioning of some uncompetitive capacities in the sector globally has created a stable price environment. During the first half of this year, we have actually been able to implement a slight price increase for some of our products.

Both our new lines commenced commercial production during the quarter, resulting in substantial volume growth. I believe our consistent focus on cost effectiveness, value engineering, and quality combined with our increased scale of operations should translate into a noticeably better financial performance for the full year FY2007."

Q2FY2007 results overview

Revenues for the quarter increased noticeably, up 35% to Rs 3431 million from Rs 2544 million in the corresponding quarter last year, with sales volumes significantly higher at 1.9 million units. The increase in volumes was primarily driven by the commercialisation of the Company’s two new lines, Line 4 and Line 5, during the quarter. Both lines are ramping up as per plan and are expected to start contributing fully to operations by Q4FY2007.

PBIDT for the quarter increased 40% to Rs 329 million. Depreciation charges were higher in the quarter, reflecting the commercialisation of the two new lines. Resultantly, PAT was lower at Rs. (6) million. Cash profit, however, was better at Rs. 161 million.

The earnings for the quarter were affected by PBDT losses aggregating to Rs 106 million incurred by the two new lines (Line 4 and Line 5) that should achieve cash break-even over the next few months as production is ramped up to optimal capacity. Without these losses, the Company would have reported significantly higher and positive earnings for the quarter as the other three lines have been performing optimally.

H1FY2007 results review

The Company reported a 21% rise in revenues for the first half of this year to Rs 5787 million, driven by higher volumes and an improved business environment. Last year, the Company’s performance had been affected by inventory liquidation and stock clearance by some global CPT manufacturers, which had led to an immediate downward adjustment in CPT prices compared to a gradual decline, which was anticipated by the industry. The price scenario has now stabilized and is likely to enable Samtel Color to derive the benefits of its substantially enhanced capacities at a time when market conditions have turned favourable.

PBIDT stood at Rs 543 million, and with depreciation charges rising due to the commercialisation of two new lines, PAT was lower at Rs. (3) million. Cash Profit for the half year was Rs. 279 million. PAT would have been substantially higher if the PBDT losses incurred by the 2 new lines amounting to Rs 106 million are excluded from performance, because all other lines of the Company performed optimally. The new lines are likely to cash break-even in Q3FY2007 and the Company’s earnings performance is therefore expected to be better in the second-half of the current year.

Sales volume for H1FY2007 was 3.46 million units, 26% higher than in the corresponding period last year. Improvements in market dynamics and Samtel Color’s operational metrics indicate an encouraging trend going forward. With several uncompetitive manufacturing units in the CPT sector getting decommissioned over the past few months, Samtel Color has witnessed a noticeable increase in its domestic market share from about 38-40% last year to around 45% now. Given that the Company’s total annual capacity is now over 10 million units, Samtel Color should be able to sustain its market dominance going forward as it realizes the full potential of its expanded capacities.

Source : Equity Bulls

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