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33
Annual Report 2011-12
32 Kajaria Ceramics Limited
In a challenging year, the Company
registered robust growth vindicating
the resilience and robustness of the
business model to deliver superior
returns in good times and bad.
A) Profit and Loss Account
Revenue
Revenue growth was driven by a
combination of volume and value-led
initiatives. Interestingly, the growth
was better than estimated initially
and also on a higher base.
Volume growth:
Sales volumes
increased 33% from 29.71 MSM in
2010-11 to 39.37 MSM in 2011-12.
This increase was driven by a number
of factors:
•
Full impact of expended capacities
which were commissioned in the last
quarter of 2010-11 and addition of
2.30 MSM capacity due to Soriso
acquisition in February 2011
•
Continued increase in domestic
outsourcing and imports
Value addition:
The Company’s sales
mix altered in favour of high-end tiles
consequent to the launch of unique
products which met customer
aspiration and were well accepted in
the markets. The newly launched
digital printing (on ceramic and
vitrified tiles) enhanced realisations
significantly.
Operational cost
Operational expenses grew 40.79%
from
`
8,010.58 million in 2010-11 to
`
11,278.14 million in 2011-12. This
sizeable increase was influenced by a
combination of factors namely
increased operational scale, increased
outsourcing, inflationary pressures
which hiked input cost and sharp
rupee depreciation which made
imports dearer.
Power and fuel cost jumped sharply
from
`
926.61 million in 2010-11 to
`
1,937.81 million in 2011-12. This
steep hike can be attributed to three
factors – increased production from
19.30 MSM in 2010-11 to 27.14 MSM
in 2011-12, a higher gas price for the
additional production capacity as
compared with the earlier supply
contract and the sharp rupee
depreciation which further fuelled the
gas price northwards.
Employee costs increased from
`
758.07 million in 2010-11 to
`
1,036.57 million in 2011-12 for the
following reasons:
•
Increased team size for manning
expanding operational scale
•
Annual increment and performance
incentives which added to the
employee bill
But this increase was offset with the
growing contribution of team members
towards the Company’s growth
reflected in important statistics:
•
Revenue per employee increased
18.25% from
`
5.34 million in 2010-
11 to
`
6.32 million in 2011-12.
•
EBIDTA per employee increased
16.49% from
`
0.83 million in 2010-
11 to
`
0.97 million 2011-12
Margins
Notwithstanding, the adverse external
environment, EBIDTA grew from
`
1,486.14 million in 2010-11 to
`
2,015.77 million in 2011-12.
However, the EBIDTA margin declined
marginally by 24 bps from 15.61% in
2010-11 to 15.37% in 2011-12 - the
downward slide arrested by the
Company’s focus on value-added tiles
and cost optimisation initiatives. The
net margin also declined 21 bps from
6.37% to 6.16% over the same
period primarily due to foreign
exchange loses on imports.
Interest
Interest liability increased from
`
299.39 million in 2010-11 to
`
469.82 million in 2011-12 despite a
decline in the total debt position. This
was primarily due to interest on loans
taken for expansions in 2010-11
(capitalised in that year) charged to
profit and loss in 2011-12, foreign
exchange losses amounting to
`
79.11
million due to import of tiles and raw
materials (as against a gain of
`
32.45
million in 2010-11) and successive
interest rate hikes during the year.
Taxation
Provision for current tax stood at
`
368.03 million in 2011-12 against
`
285.14 million in 2010-11 in due to
a 31.78% increase in profit before
tax. The average tax was 31.32% in
2011-12.
Ploughback
The Company ploughed
`
593.35
million into the business in 2011-12
against
`
435.58 million in 2010-11 -
a 36.22% increase. These funds will
be progressively utilised for capital
intensive initiatives – organic and
inorganic – and de-leveraging the
Balance Sheet.
B) Balance Sheet
Capital employed
Capital employed in the business
increased 4.41% from
`
5,624.31
million in 2010-11 to
`
5,872.49
million in 2011-12 consequent to
reinvestment of operational surplus in
the business. The Company’s well-
timed business strategies and
intelligently funding practices
resulted in growing the Return on
Average Capital Employed by 634 bps
from 22.28% as on 31st March, 2011
to 28.62% as on 31st March, 2012.
Capital Employed has been calculated
as shown in Table 1:
Networth
Networth (shareholders’ fund)
increased 26.66% from
`
2,225.61
million as on 31st March, 2011 to
`
2,818.97 million as on 31st March,
2012 owing to an increase in
reserves. Hence, networth as a
proportion of capital employed,
increased from 39.57% as on 31st
March, 2011 to 48.00% as on 31st
March, 2012. The book value per
share climbed from
`
30.25 as on 31st
March, 2011 to
`
38.31 as on 31st
March, 2012.
Equity capital:
It comprised
7,35,83,580 equity shares with a face
value of
`
2 each as on 31st March,
2012. The promoters holding
comprised 53.51% of the issued
equity capital as on 31st March, 2012
while foreign holding stood at 9.61%
as on that date.
Reserves and surplus:
These zero-cost
funds grew 28.55% from
`
2,078.44
million as on 31st March, 2011 to
`
2,671.80 million as on 31st March,
2012, owing to reinvestment of
operational surplus in 2011-12. The
Company’s prudent policy of utilising
these free-cost funds for business
growth and asset de-leveraging
strengthened the Return on equity
(ROE) by 255 bps from 29.45% as on
31st March, 2011 to 32.00% as on
31st March, 2012.
External debt
Total external debt stood at
`
2,417.24
million as of 31st March, 2012 against
`
2,796.79 million as on 31st March,
2011 a decrease of 13.57% despite
significant investments in acquisitions
and routine capital expenditure. As a
result, the debt-equity ratio declined
from 1.26 as on March 31 2011 to
0.86 as on 31st March, 2012.
Total debt is reflected in the Balance
Sheet (as on 31st March, 2012) in the
various heads as shown in Table 2 on
page 34:
Long-term borrowings:
It represents
the term loans taken for capital
intensive projects. The Company
prudently deployed business surplus
ANALYSIS OF THE
FINANCIAL STATEMENTS
Table1: Reconciliation of Capital employed
(
`
in Million)
As at 31st March, 2012
As at 31st March, 2011
Shareholder’s funds
2,818.97
2,225.61
External debt
2,417.24
2,796.79
Deferred tax liabilities
636.28
601.91
Capital employed
5,872.49
5,624.31
Average capital employed
5,748.40
5,347.26
Interest cover (x)
2007-08
1.50
1.22
2.37
3.98
3.50
Ploughback (
`
million)
133.00
71.78
272.71
435.58
593.35
Dividend payout including
dividend tax (
`
million )
17.22
17.22
85.80
171.04
213.80
2008-09
2009-10
2010-11
2011-12