See 20% growth in building products biz in FY15: HSIL

Written By Unknown on Kamis, 28 Agustus 2014 | 21.03

HSIL Ltd , which makes sanitary ware under the Hindware brand and is the flagship of the Somany Group, expects to maintain margins in its building products segment, says president RB Kabra. Speaking to CNBC-TV18's Reema Tendulkar & Ekta Batra, Kabra said he sees building products business growth at 20 percent and packaging products segment growth at 8-10 percent in FY15.

He says the company is looking to breakeven at operational level in its glass division. "We are on the path of recovery in the glass business because demand is growing, sentiments are improving and we started getting price increases from some of our customers," he said.

Below is a verbatim transcript of the interview

Reema: Very recently the company had merged Garden Polymers; in fact Q1 earnings also included the performance of this subsidiary. Now on a consolidated basis what will the revenue and margins look like for the company in FY15?

A: There are two strategic business units (SBUs). One is building product division and other is packaging glass business. Earlier it was a glass division and we acquired pack bottle manufacturing company three years ago as a wholly-owned subsidiary. It was merged on balance sheet of March 31.

Now, both these divisions are building product division as well as packaging product division has around 50 percent of revenue contribution in the total revenues of the company. We have given guidance of 20 percent growth in the revenues of the building product division for FY15 and 8-10 percent sales growth in the packaging product division business.

Coming to the margins, we say that we will be able to maintain the margins of the building product division going forward and for the glass, which suffered very heavily last year because of overcapacity and customer base not growing as expected and cost going up.

We had done a lot of work; we have controlled our power and fuel cost, substituted costlier fuel with cheaper fuel and with that we are confident that going forward the losses in the glass business in FY15 should be breakeven or at worse we could be at a loss of Rs 8 crore to Rs 10 crore.

So, we are on the path of recovery in the glass business because demand is growing, sentiments are improving and we started getting price increases from some of our customers.

Ekta: I wanted to concentrate on your backward integration which the company seems to have undertaken. We do understand that you acquired an engineering works company as well which makes moulds and dyes. Can you give us a sense in terms of what your backward integration currently looks like and how could it improve your entire consolidated margins in FY15?

A: We have been a backward integrated company in both the divisions. If you talk of building products, we manufacture some of our own raw materials. For the glass, we have our own quartz mine, which is one of the very important raw material for glass manufacturing and we entered into faucet business three years ago by acquiring a small capacity and we have just commissioned a large faucet plant of 2.5 million piece per annum capacity.

However, for the glass bottle manufacturing and the faucet manufacturing, we require dyes of various shapes. The glass business has in-house capacity of manufacturing dyes. We are looking at new customer base to increase our sales and similarly for the faucets, we will be requiring lot of new dyes because we have to launch lot of new ranges.

Therefore, the in-house capacity was falling short and that is the reason that we acquired this company. It is not going to affect the profitability as such but it will help us in fast launch of products in the market because it will help us to double up dyes faster because our in-house capacity, what we have for making dyes for the glass bottles or for the faucets is falling short looking at our enhanced product launch we are planning.

HSIL stock price

On August 22, 2014, HSIL closed at Rs 309.40, up Rs 1.40, or 0.45 percent. The 52-week high of the share was Rs 329.00 and the 52-week low was Rs 75.55.


The company's trailing 12-month (TTM) EPS was at Rs 9.88 per share as per the quarter ended June 2014. The stock's price-to-earnings (P/E) ratio was 31.32. The latest book value of the company is Rs 173.42 per share. At current value, the price-to-book value of the company is 1.78.


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