CMC’s Revenues Decline By 7% In Q1FY14

CMC announced a disappointing set of numbers post market hours on July 15, 2013. It witnessed pressures from multiple fronts resulting in subdued financials. Stock prices of CMC fell by 4.53% to Rs 1290 per share on July 16, 2013.

In Q1FY14, the company saw a decline in revenues of 7.13% to Rs 486.61 crore, on a sequential basis. The major drag came from its ‘Customer Services’ segment, revenues from which declined by 38.06% to Rs 96.68 crore. Revenues from Systems Integration and IT Enabled Services grew by 7.81% and 4.31% respectively. However, this didn’t provide support to the overall growth.

The IT company declared that it saw its other income of Rs 4.24 crore from profit on the sale of fixed assets. Also, other income pertaining to the company included Rs 56.49 crore as dividend from its wholly-owned subsidiary CMC Americas Inc. This is more than double the dividend received from this subsidiary in the whole of FY13.

In Q1FY14, CMC also took a hit on its profitability. Its operating profit declined by 5.47% to Rs 70.88 crore and its net profit by 13.38% to Rs 53.13 crore. The decline in net profit can be attributed to the growth in the tax it paid because of the additional dividend it picked up.

The performance of CMC has clearly been disappointing. However, the management is optimistic about the prospects of the company. It is aiming at growth that is ahead of the overall IT industry. It has in the past outperformed the industry.

We have earlier been positive about the prospects of the company on account of its broad-based growth, margin improvement, concentration on systems integration and traction in key verticals. We maintain this outlook owing to robust performance in the past and an optimistic outlook expressed by the management.