Q4FY13: GSFC Disappoints Markets

The Gujarat State promoted fertiliser company GSFC in its Q4FY13 results has reported a decline in the net profit. For the quarter ended March 31, 2013, GSFC has reported 11% growth in its revenues to Rs 1696 crore. Its net profit, however, has tumbled by 75% from Rs 230 crore a year ago to Rs 58 crore in Q4FY13.

Of its two business lines, the fertiliser business has posted 18% growth in its revenues to Rs 1200 crore. The industrial products division has reported 3% decline in the revenues. For the quarter, on a YoY basis, the PBIT margins of the fertiliser business have declined by 334 basis points while that of industrial products business have declined sharply by more than 23%, indicating that this business has impacted the growth of the company in the quarter.

The company has reported a strong rise in its inventories which increased its overall costs. The employee expenses also rose sharply from Rs 118 crore in Q4FY12 to Rs 146 crore in Q4FY13 which has put pressure on the profitability of the company. Overall, it has reported an EBITDA of Rs 127 crore against Rs 294 reported a year before. The margins declined sharply from 19.22% in Q4FY12 to 7.5% in Q4FY13.

On the non-operating side, the company has reported a decline in the other income from Rs 66 crore to Rs 18 crore. Its finance cost has soared by 134% i.e. from Rs 5.4 crore to Rs 12.66 crore. Due to the rise in the input costs and inventories, its profit before tax has declined by 71%. Besides, the tax expenses in the quarter have remained below the level seen in the last year. In absolute terms, its tax has declined by 63% to Rs 40 crore in the quarter. All these factors have contributed to the weak profitability of the company in the quarter.

On the balance sheet, the company has reported Rs 239 crore as a long-term liability. Last year, it had no long-term liabilities. Besides, its short-term liabilities have also doubled. The most concerning factor is that its receivables have increased by 102% whereas in FY13, its topline only witnessed a growth of 18%, indicating that receivables is an area of concern. Even if one compares the total receivables as percentage of sales for FY12, they stood at 27% which have reached 46.5% in FY13.

The stock too has underperformed in FY2012-13 with the value of the stock depleting by more than 30%. We would certainly advise investors to avoid the stock at the moment.