"Our ability to report profitable growth in a challenging year represents ourspirit of beyond' the ability to extend beyond the usual commitmentto enhance value beyond the ordinary and focus to extend the impact of our performancefrom the immediate to the sustainable."
The spirit of beyond'
If there were two words that faithfully encapsulated the year 2016-17 they would bedisruptive unpredictability.' If there was one reality that enabled us to counterdisruptive unpredictability it would be the spirit of beyond'.
The year was marked by a number of unexpected developments comprising one of thebiggest
New directional initiatives
At Greenlam Industries we have always believed that sustainable success is derivedfrom the ability to look plan and implement beyond the immediate. Over the years thiswas reflected in our ability to invest in manufacturing facilities for the future buildmore capacity than would be immediately needed invest in the ability to scale capacitywith speed by investing in additional infrastructure and completing the product mix inpreparation for the markets of the future. A number of people questioned upsets in USelectoral history Britain voting to exit the European Union and the largest currencydemonetisation attempted in the history of humankind. For a company that markets 43.9% ofits consolidated revenues outside India the year under review should hypothetically havebeen devastating. The reality is that Greenlam reported a 4.5% growth
this approach on the grounds that during the aggressive phase of capacity buildingsuch an approach would not be value-accretive that quarterly earnings would be affectedand there could be a gestation between investment and returns. We believed that this wouldbe the case in the short time during the phase of gestation; we also believed that whendemand strengthened and our capacities were better utilized the pass-through of increasedrevenues to RoCE would be quicker. I am pleased to report that our performance in 2016-17reflected in revenues and 32.1% in profit after tax (at consolidated level). The abilityof the Companyto report profitable growth in a challenging year represents its spirit ofbeyond' the ability to extend beyond the usual commitment to enhance valuebeyond the ordinary and a focus to extend the impact of our performance from the immediateto the sustainable.
precisely this conviction. We reported an increase in margins and overall businessviability in the face of only a modest increase in revenues which only validates therobustness of our business model to be able to scale margins as our capacity utilisationincreases and revenues strengthen.
The big message that I wish to communicate is that we demonstrated the strength of ourbusiness model through the laboratory of last year's challenging business environment; asbusiness conditions strengthen we expect to do even better.
The heart of our competitiveness
I am pleased to report that despite the various challenges within the global and Indianeconomies Greenlam reported the following numbers: Consolidated revenues grew 4.5% to H1076 crores in
2016-17; the domestic laminate segment grew 6.5% Consolidated EBIDTA stood at H141.3crores against H129.5 crores in 2015-16 a growth of 9.1% Consolidated EBIDTA margin stoodat 13.1% against 12.6% in 2015-16 Consolidated PAT stood at H49.8 crores against 37.7crore in 2015-16 a growth of 32.1%
These improvements validate that even in the most challenging of markets theCompanyreported reasonable improvements that were higher than the benchmarks reported bythe overall sector and industry peers.
One of the attractive turnarounds during the course of the year was the aggregateperformance of our subsidiary companies in the global markets. The aggregate performanceof these subsidiaries had been negative in the earlier years on account ofbusiness-building investments that needed to have been made upfront; during the year underreview the subsidiaries (aggregated) reported a creditable turnaround most of theprominent subsidiaries reporting a surplus. This transformation was the result of theselarger subsidiaries engaging in focused strategies that included growing sales volumes andfocusing on markets that provided the highest realisations. The objective of theCompanygoing forward would be to turn the few remaining subsidiaries to a surplusstrengthening our returns from the international markets.
At the heart of our company's outperformance in a challenging year was our prudentcapital allocation. As I indicated earlier we had consistently emphasized that wepreferred to be fully invested across interior infrastructure products at the outsetwhich would translate into an upturn in the demand of our products as soon as economicrealities improved. The result was that we started with low percentage asset utilisation;however we were convinced that as we consumed our extensive operating leverage with nocorresponding increase in capital investments we would report improved profitability.
I am pleased to report that this is the very reality that transpired during the yearunder review. As we strengthened offtake that increased our capacity utilisation westrengthened our consolidated ROCE: from 14.8% in 2015-16 to 19.1% in 2016-17;correspondingly our consolidated ROE grew from 15.4% in the previous year to 17.1% in2016-17.
At Greenlam we believe that the heart of a successful company lies in its workingcapital efficiency. As business conditions became increasingly challenging Greenlamcontinued to emphasise the importance of liquidity with the objective to generate enhancedsurpluses through increased operating efficiencies.
One of the most courageous initiatives that we embarked upon was in selecting tocounter demonetization through a resetting of our receivables cycle. Normally during aperiod of sectoral slowdown and cash crunch (as we saw during the demonetisation) itwould have been reasonable to extend the debtors' cycle. During the year under review wedid just the reverse: we tightened our credit period and called our money in faster. Theresult is that our consolidated debtors' cycle declined from 65 days of turnoverequivalent in 2015-16 to 49 days in 2016-17. I am pleased to report that this among otherdecisions kick-started a stronger virtuous cycle: enhanced liquidity declining interestcosts and a stronger Balance Sheet. Besides we strengthened our inventory management offinished products; our consolidated inventory-to-turnover days declined from 88 days in2105-16 to 77 days in 2016-17. Our stronger working capital management sent a serioussignal of our trade discipline to the market while we reinvested in products capacitiesand brand to help our dealer-partners sell quicker and higher.
We reinforced our Consolidated Balance Sheet through debt optimization (that reduced by38% to H225 crore as on 31 March 2017) and through an increased plough-back into ourreserves (by H46 crore in 2016-17 to a cumulative H279 crore) thereby creating a strongerfinancial pool. On the Consolidated P&L front our interest cost optimized by 12% toH28 crore in 2016-17 with a strong profitability implication even as our net profitmargins rose 90 bps to 4.6% during the year under report. This cycle with greaterbenefits is expected