Greenply Industries: Q3FY14 Result Review

Greenply Industries (GIL), an interior infrastructure company in India, today (January 30, 2014) announced its current financial year's third quarter result. The financial performance remained under pressure in Q3FY14 as against a year ago in the similar period.

Total income of the company grew by 2.8%, however the net profit dropped by 2.8% on yearly basis. Domestic sales stood at 84.35% of the sales and exports contributed 15.65% to the overall sales.

On the segmental front, sales in the Plywood and Laminates segment grew by 3% and 12% in Q3FY14 respectively. However the revenues were affected due to the sharp drop in sales in the medium density fiberboard (MDF) segment. In the MDF segment, the capacity utilization during December quarter of FY14 has come down to 70% from 90% in Q3FY13.

On expenses front, GIL's total expenses increased by 3% to Rs 457.6 crore, on account of increase in cost of material consumed (increased 7.5% to Rs 296 crore). Employee expenses increased by 18% to Rs 49 crore on YoY basis.

EBITDA for the quarter declined by 1% to Rs 67 crore and EBITDA margin contracted by by 52 basis points to 12.76% on yearly basis. Net margin also narrowed by 31 basis points to 5.44% for the same period.

The reason given by company behind the muted sales performance is the decline in demand from consumers in the particular quarter. Although the company didn't disclosed the particular segment in which the demand has been declined. The major reason for the drop is the slowdown in the real estate sector. The volume growth during the period also remained weaker, especially in the MDF segment.

Further, for the forthcoming quarter, the company has plans to launch 2 value added products (Rs 120-125 crore investment) in the laminate segment in Rajasthan plant. Also, they have plans of expansion in Myanmar with an investment of Rs 50 crore, which will be commercialized in the second quarter of next financial year.

Despite lower demand and higher competitiveness in the plywood and laminate sector, the company has no plans to hike its product prices. This in turn will put pressure on the company's topline and bottomline if they failed to maintain the volume growth in all these segments.

GIL's stock price also got impacted by the stressed performance in Q3FY14, dropped by 2.7% closed at Rs 329 in today's trading session.