Jain Irrigation: Q2FY15 Result Analysis

India’s largest micro irrigation company and globally second largest, Jain Irrigation has announced its second quarter FY15 results. The company showed a flattish growth in its topline numbers. However, the reported loss has considerably reduced compared to the same period last year.

On standalone basis, the company’s overall revenue grew marginally by 0.8 per cent on yearly basis. The domestic business grew by 10.3 per cent, but the export declined by 22 per cent in current quarter on yearly basis. Segment-wise, Micro Irrigation (MIS) revenue showed a strong growth of 29.6 per cent. The PVC pipe revenue grew by 21.5 per cent. The export revenue declined majorly due to lower export in MIS to African geographies and lower export of PVC sheets because of shifting of two production lines to Ireland (Europe).

The company’s EBIDTA stood at Rs 134 crore during Q2FY15 against Rs 135 crore during Q2FY14. The EBITDA margin stood at 15.8 per cent for the current quarter against 16.0 per cent in the corresponding quarter previous year. The net loss for the reported quarter stood at Rs 19 crore against net loss of Rs 65 crore in the same quarter last year. According to a company filing, the profit impacted by Rs 8.1 crore due to higher depreciation charges as per Companies Act 2013. However, the cash profit of the company stood at Rs 25 crore against the cash loss of Rs 31 crore in the same quarter last year.

On consolidated basis, the company’s revenue showed a growth of 3.4 per cent on yearly basis. The overseas revenue contribution stood at 35 per cent and showed a growth of 8.7 per cent compared to the corresponding quarter in previous year. The EBITDA margins stood at 13.10 per cent during current quarter against 13.20 per cent in same quarter last year.

Anil Jain, Managing Director, Jain Irrigation said, “Micro Irrigation (MIS) has done extremely well in domestic market, despite the fact that this is lowest revenue quarter, MIS has grown in all major domestic geographies. Projects executions are going well at Ramthal and other places. Onion dehydration business continues to do well. Though fruit business has declined in this quarter due to seasonality (47.7% growth in Q1) , still with strong orders in hand, we are very confident of a good growth in this business for whole year. PVC pipe business also back to growth now albeit with lower margins. We are facing challenges in PE pipe due to uncertainty which is still prevalent in infrastructure sector. Company is getting ready to be a strong player in solar water pump field. We are taking initiative to promote MIS for Rice and Wheat cultivation, as a proposed project with Government of Punjab.

We are continuously focusing on reduction of receivable levels further. With the stabilizing of crude prices at lower band , busy season revenue mix, expected better capacity utilization ,second half is expected to be better than first half. Company maintains its medium term target of reaching debt equity level of 1:1 by FY16 through various actions at operational efficiency level and corporate level. Decision of the board to subsidiarise the Food Processing business provides good opportunity to company for unlocking value by fund raising through minority dilution.”