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Company Report

NIRMA

Nirma Limited has put up an impressive performance for the third quarter ended December with total income rising 9 per cent to Rs 539.10 crore (Rs 494.95 crore). The total spending went up by 6 per cent to Rs 474.61 crore (Rs 446.48 crore) leading to a healthy 35 per cent improvement in net profit.

Its sequential quarter performance was also decent with a 17 per cent rise in total income and a 16 per cent increment in total costs entailing a 25 per cent rise in the net profits. At Rs 536.30 crore (Rs 490.84 crore), income from operation was up 9 per cent over the year-ago period. Sequentially the same went up by 17 per cent over the September quarter income of Rs 457.19 crore.

Soaps and detergents constitute the bulk of Nirma’s business contributing almost entirely to its turnover. The chemicals business consists of only a fragment of the entire business.

Raw material cost moved up by about 5 per cent year-on-year and 3 per cent sequentially. Staff costs rose 14 per cent (13 per cent sequentially). Other expenditure jumped 16 per cent in the reported period. These factors contributed to an overall rise in operational costs by 13 per cent over the previous corresponding quarter to Rs 406.84 crore (Rs 360.14 crore) and 18 per cent sequentially.

Since operational spending moved up in tandem with revenues, margins shrunk. Operating profit fell by 1 per cent on a year-on-year basis but managed to rise by 16 per cent over the preceding quarter to Rs 129.46 crore (Rs 130.70 crore). The operating profit margin at 24 per cent was the same as it earned during the September quarter but down 3 percentage points against the 27 per cent it reported during the year-ago period.

Other income declined by 32 per cent over the year-ago period to Rs 2.80 crore (Rs 4.11 crore). Sequentially too it was down 47 per cent from the September quarter earning of Rs 5.31 crore.

Nirma reported a net profit of Rs 64.49 crore (Rs 48.47 crore), up 33 per cent from the year-ago period. Sequentially the same went up by 22 per cent from the September quarter profit of Rs 52.80 crore.

The stock is currently trading at Rs 230, discounting its December quarter annualised earnings per share of Rs 32.50 by seven times. Unless Nirma, like other FMCG companies, can come out of a sluggish pattern of sales and margins, the stock is unlikely to move much.

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