Balkrishna Industriesreported 24% drop in net profit at Rs 144.7crore for thethird quarter ended Dec 2018. The company had posted a net profit of Rs 189.5 crore in the corresponding period a year ago. Its total income from operations was up 9% to Rs 1,205.59 crore during the quarter under review as against Rs 1106.31crore in the same quarter last fiscal.

The company witnessed drop in margins during the quarter due to rise in expenses on all fronts. A forex loss of Rs 32 crore was mainly responsible for the drop in profits during the quarter. Else, the company registered 17% rise in profits to Rd 248.87 crore during the quarterat the PBT before forex level aided by surge in other income.

Quarterly Performance

The company witnessed increase in the raw material cost(inclusive of purchase of stock in trade) and employee costduringthird quarter ended Dec 2018. The raw material cost as % of sales net of stock adjustments rose 70 bps to 46.6%. The employee cost was almost steady at 5.55% in Q3 FY 18-19. Other expenses rose 70bps to 23.1%. Resultantly, operating margins fell 120 bps to 25%. Operating profit rose 4% to Rs 300.89crore on a y-o-y basis.

Average natural rubber (NR) prices which is the key input cost were lower on yoy basis during the quarter ended Dec 2018. Prices hovered between Rs 96/Kg to Rs 105/Kg during 2018 third quarter vis a vis Rs 107/Kg a year ago.

With seven-foldrise in other income to Rs 33.34crore, PBIDT rose 13% to Rs334.23crore. Interest cost rose 5%to Rs 1.99 crore. Depreciation cost increased 4% at Rs 83.37crore. Thus, PBT before forexregistered 17% riseto Rs 248.87 crore. Following a forex loss of Rs 32.37 crore, vs a vis gain of Rs 73 crore in previous year, PBT after forex fell 24% to Rs 216.5 crore. After considering 56 bps decrease in the effective tax rate at around 33.16% and 26% dropin tax provision to Rs 71.8 crore, PAT fell 24% at Rs 144.7 crore.

Nine Month Performance:

The company reported 9% rise in net profit at Rs 597.26 crore for the first nine months ended Dec 2018. The company had posted a net profit of Rs 545.63crore in the corresponding period a year ago. Its total income from operations was up 20% to Rs 3,893.46crore during the period under review as against Rs 3232.7crore in the same quarter last fiscal.

The company witnessed decrease in the raw material cost (inclusive of purchase of stock in trade) and employee cost duringthe first nine month ended Dec 2018. The raw material cost as % of sales net of stock adjustments fell 210 bps to 47.1%. The employee cost fell 34 bps to 5.16% in 9M FY 18-19. Other expenses rose 230 bps to 22.6%. Resultantly, operating margins rose 40 bps to 25.5%. Operating profit rose 22% to Rs 991.1crore on a y-o-y basis.

With 17% rise in other income to Rs 64.14 crore, PBIDT rose 22% to Rs1055.3 crore. Interest cost fell 19% to Rs 7.76 crore. Depreciation cost increased 7% at Rs 250.29 crore. Thus, PBT before forex registered 28% rise to Rs 797.21 crore. Following 44% drop in forex gain at Rs 109.92 crore, PBT after forex rose 11% to Rs 907.13 crore. After considering 60 bps increase in the effective tax rate at around 34.16% and 13% rise in tax provision to Rs 309.87 crore, PAT grew 9% at Rs 597.26 crore.

The stocks is currently trading around Rs 836 at BSE.

Balkrishna Industries: Standalone Results