Ador welding is of the two leading players in organized Indian welding consumable & equipment market. Its project engineering division offers customized solution and products that meet stringent industrial codes and standards apart from welding equipment. Total integration of system package enables the company to fulfill complex assignments and projects.

Quarterly results

For the quarter ended Sep '06, Ador Welding's net sales stood at Rs 70.95 crore, up by 14%. The OPM (Operating Profit Margin) fell by 380 basis points to 19.8%, owing to a spurt in input costs and higher base in the corresponding previous quarter. The resultant Operating Profit for the quarter ended Sep '06 stood at Rs 14.05 crore (down by 4%). The staff costs and other expenditure (as a % to sales), on the other hand dropped by 170 bps and 320 bps to 7.8% and 15.9%, respectively.

The Other Income for the period soared by 273% yoy to Rs 1.23 crore. The resultant PBIDT for the quarter ended Sep '06 stood at Rs 15.28 crore, which was 2% higher as compared to corresponding previous quarter last year.

Interest expenses of Rs 0.27 crore as against an Interest income of Rs 0.34 crore during the corresponding previous quarter last year and higher depreciation charges of Rs 1.58 crore (up by 12%) further dragged down the profits, causing the PBT to decline by 4% at Rs 13.43 crore.

EO item was Nil as against an EO income of Rs 4.92 crore in the corresponding previous quarter, thus resulting in a 29% decline in PBT after EO to Rs 13.43 crore. Provision for taxation (including deferred tax and fringe benefit tax) for the quarter stood Rs 1.88 crore as against Rs 4.03 crore in the corresponding previous quarter, thereby resulting in a PAT of Rs 11.55 crore for the quarter ended Sep’ 06 (down by 22%).

Half-yearly results

For the half year ended Sep ’06, AWL has registered a sales of Rs 114.03 crore, recording a rise of 2%. Operating profit was lower by 11% to Rs 18.06 crore, triggered by a 230 bps erosion in OPM to 15.8%.

Other income for the period was higher by 13% to Rs 2.51 crore. Interest outgo was Rs 46 lakh as against an income of Rs 66 lakh in the corresponding previous period. Depreciation was higher by 14% to Rs 3.14 crore. Thereby PBT declined by 17% to Rs 16.97 crore. EO income was Nil as against Rs 4.92 crore in the corresponding previous period. The PBT after EO was therefore lower by 33% to Rs 16.97 crore. With taxation lower by 46% at Rs 2.87 crore, the decline in PAT was restricted to 29% at Rs 14.10 crore.

Segment Results

For the quarter ended Sep’06, most of the upside in revenues came from Equipment division, growing by a substantial 55% to Rs 23.90 crore (contributing to 37% of total sales). On the other hand, the segment revenue of consumables division grew by a meager 1% to Rs 47.05 crore (or 66% of total sales). At the PBIT level as well, the equipment division witnessed a strong growth of 72% at R 6.60 crore (43% of total PBIT). However, the consumables division showed a degrowth of 24% at Rs 8.65 crore.

For the half year ended Sep ’06 the segment profit of consumable business was lower by 32% to Rs 12 crore (or 56% of total PBIT) on a segment sales that registered 8% degrowth to Rs 77 crore (or 68% of total sales). Similarly the segment profit of equipment was higher by 41% to Rs 9 crore (or 44% of total PBIT) on a segment revenue of Rs 37 crore (up 33% accounting for 32% of total sales).

Valuation

On an equity of Rs 13.60 crore and face value of Rs 10 per share, the EPS for FY ’06 works out to Rs 29.6. The share price currently trades at around Rs 297.65.