| Gujarat Ambuja's share price rose two per cent after it reported March quarter results that were slightly better than expected. The company's operating profit stood at Rs 199.1 crore, marginally higher than the year ago level of Rs 190.8 crore.
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| Last year's operating profit is adjusted for an exceptional expense of Rs 8.53 crore on account of a change in accounting policy for certain staff and sales promotion expenses.
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| But further adjustments need to be done, since this year's numbers include results of ACRL (Ambuja Cement Rajasthan Ltd), while in the year-ago period, ACRL's numbers were reported separately.
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| Adding ACRL's profit to last year's March quarter profit gives a figure of Rs 218.8 crore, which means profit has declined significantly on a like-to-like basis.
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| Of course, one would have to adjust for inter-company transfers, which would lower last year's profit figure, but even then there would be a y-o-y fall in operating profit.
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| This is not really surprising, what with adjusted sales being flat in volume terms. Urmik Chhaya, analyst at Anand Rathi Securities, points out that consumption in the north fell by two per cent because of the severe winter in the region.
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| In Punjab, consumption fell by as much as 10 per cent. This led to a flat trend in price realisations in the northern region last quarter.
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| In fact, realisations were flat even in the Gujarat, Mumbai and Nagpur markets.
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| Average realisations were higher by about 4.5 per cent on a y-o-y basis, mainly because of an increase in prices in export markets.
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| To add to Gujarat Ambuja's woes, operating cost has seen a spike this year. Cost of power and fuel on a per tonne basis jumped by almost 23 per cent. At around 35 per cent of operating cost, power and fuel expenses have a significant bearing on the company's financials.
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| Fortunately for the company, prices of imported fuel have come down compared with the previous quarter. This, coupled with the fact that realisations have picked up in the domestic market should result in a relatively better performance in the June quarter.
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| Biocon
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| Biocon's consolidated numbers for the fourth quarter of FY05 have been disappointing, to say the least. Sales grew 20.6 per cent y-o-y to Rs 175 crore, but PBDIT at Rs 52 crore was up just 6 per cent. This was because manufacturing and other expenses rose Rs 126 crore, a jump of 31.25 per cent.
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| What's more, the Q4 numbers have dragged down the results for FY05 -- while sales were up 36 per cent for the nine month period ended December 2004, they rose by just 32 per cent for FY05 as a whole.
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| That's true for operating and net profits as well-the percentage increase for the full year was well below the increase for the first three quarters.
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| Sales of bio-pharmaceuticals grew at just 14 per cent in Q4 compared with 33 per cent for the first nine months, the result of statin prices falling around 25 per cent in Europe.
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| For FY06, the management has said it will grow its revenues by about 25-30 per cent with the new statins capacity having gone on stream, though Simvastatin and Pravastatin will be sold in the US in FY07 only.
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| However, it has cautioned that profit growth would not keep up with sales since the depreciation would be higher.
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| Besides, investments in R&D would also increase. The contract research business should continue to do well in FY06.
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| At the current price of Rs 400, the stock 's valuations appear a bit expensive at 16.6 times estimated FY06 earnings of Rs 23, especially since the management has hinted that earnings would be under pressure this fiscal.
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| With contributions from Shobhana Subramanian and Mobis Philipose |
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