Moser Baer’s Q2 PAT down to Rs 32.71 mn


MUMBAI: Due to the costs incurred by its entry into the entertainment business (home video and film production) and a droop in the optical storage market led by oversupply, Moser Baer India’s net profit for the quarter ending 30 September, 2007 has falled 87 per cent to Rs 32.71 million (Rs 3.27 crores). This in comparision to Rs 259.72 million (Rs 25.97 crores) for the corresponding quarter last year.


 


The company’s profit after tax in Q1 FY’08 was Rs 96 million (Rs 9.6 crores)and in Q2 FY ’07 was Rs 260 million (Rs 26 crores).


 


The company’s total income decreased from Rs 5132.52 million for the quarter ended September 30, 2006 to Rs 4903.30 million for the quarter ended September 30, 2007.


 


Moser Baer’s gross revenue in Q2 FY ’08 at Rs 4,567 million fell seven per cent sequentially primarily due to a fall in production and shipment volumes and Rupee appreciation.


 


EBITDA at Rs 1,562 million grew two per cent sequentially and by seven per cent over Q2 FY ’07. EBITDA margin (including other income) during the quarter at 32 per cent rose 120 basis points sequentially and by 350 basis points over Q2 FY’07.


 


Moser Baer India executive director Ratul Puri said, “The optical media performance has been affected by one time factors during the quarter. Despite the short term blip, the media business will continue to grow in long term, incrementally driven by next generation formats. This has also been a milestone quarter for the photovoltaic business as it starts to significantly generate revenues. The recent $ 100 million private equity deal, has set a threshold valuation of $ 1 billion, and should help us rapidly grow capacity to 500MW by 2010 – making PV a billion dollar revenue business – thereby creating incremental value for all stakeholders.”


 


Moser Baer India group CFO Yogesh Mathur added, “This has been a unique quarter for us, with one time influences. Despite short term aberrations, the media business margins remain stable helped by cost efficiencies and benefits from duty refund. Long term media industry variables remain positive with the business remaining significantly cashflow accretive. While the Photovoltaic and Entertainment business will further add $ 140 to 160 million (Rs 560 – 640 crores) to consolidated revenues during the year.”


 


The company’s media business continued to be impacted by traditional summer slackness, impacting demand and volume shipments during the period. During the quarter, a temporary shut down of one of the company’s captive power plants impacted the targeted production schedule for the quarter. This development further impacted the company’s performance.


 


While, the company has been able to get the power plant operational, it is expected to impact company’s operations for the month of October, as the power plant returns back to stability. These have been responsible for the sluggish growth in production volumes during the period.


 


The traditional business cyclicality and its impact on revenues is also accentuated during the quarter due to the strengthening of the Rupee. The ASPs during the quarter were also subdued due to dumping of media by some manufacturers as Philips cancelled their licenses.


 


Despite the negative influences during the quarter, a positive highlight has been the stability on the input cost front, especially with respect to critical raw materials. Polycarbonate prices, a key raw material for the optical business continues to be stable and well within forecast levels of +/- three per cent.


 


Entertainment Business: Moser Baer’s entertainment business continues to grow. The company has already emerged as a leader in this market in a span of six months due to its pan-India presence (offering home video copyrighted titles in multiple languages) and wide-spread distribution reach coupled with aggressive marketing.


 


Although it was launched in March 2007, the business has started to contribute to revenues during the quarter. Startup costs in this segment negatively impacted net margins during the quarter.



“With a continuing focus on improving cost and production efficiencies, our proprietary technology and a first to market position in next generation formats (HD DVD and Blu-ray disc); we continue to increase market share and consolidate our global leadership position in the industry. We remain confident that this business will continue to grow at a CAGR of 20-25 per cent over the next three years and also be significantly free cash accretive in future,” said Moser Baer India chief operating officer optical media business unit VC Agerwal.


 


While current volumes for next generation formats remain small, demand for blue laser based formats is expected to grow sharply by Q4 of FY ’08 and estimated to cross over one billion units in the next few years. Pricing of the blue laser formats continue to be firm at $5-7 per disk.


 


In the entertainment space, customer response has been overwhelming. In six months since inception, the company has been instrumental in expanding the perceived size of the legitimate domestic market by eight – nine times through its disruptive pricing strategy. With the acquisition of 900 titles from Ultra Video, Moser Baer has acquired more than 9500 titles in all major Indian languages constituting over 45 per cent of mainstream cinema in India.

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