Q2 results inline; FY14 topline to grow 10%: TTK Prestige

TTK Prestige reported flat profits for the second quarter (Q2) of the fiscal at Rs 30.30 crore versus Rs 30.28 crore in Q1. TT Jagannathan, its chairman feels that the performance has been in line with expectations. The market in South India continues to face problems and we lost 12 percent in the region, he tells CNBC-TV18. Meanwhile, non-South areas’ sales have grown smartly by 34 percent, he adds.

On the company’s stressed margins, Jagannathan says that the rising overhead costs could be attributed to those. On a year-on-year (YoY) basis, the company is targeting lower margins by 50 basis points (bps) against FY13, he adds. He expects FY14 topline growth to be at 10 percent, while bottom-line growth will be around 6 percent. Also read: TTK Prestige is on NoticeBoard. Find out why Below is the edited transcript of his interview to CNBC-TV18. Q: Could you take us through the broad highlights of the results this quarter? How have the various markets performed especially the South? Has it continued to remain a drag even in this quarter? A: Top line has grown from Rs 343 crore to Rs 353 crore, about 3 percent. Bottom-line profit before tax (PBT) has dropped from Rs 45 crore to Rs 41 crore and profit after tax (PAT) is flat, Rs 30.3 crore. All and all, it has been a quarter that we expected. Our sales in the non-South areas has grown very smartly by about 34 percent, but South unfortunately; Tamil Nadu, Kerala and Andhra Pradesh are still facing problems. Andhra is completely shutdown. We lost 12 percent in South. Hopefully in the second half we should be able to pick that up. Q: How bad is the power situation in south as the last time you told us that is the big drag? A: It has improved in Tamil Nadu from what it was two quarters ago, but there are still there. However, it is not as bad as it was. In Kerala, it has completely stopped and our sales have picked up quite nicely over the last one month. Q: The biggest concern that investors have had is the pressure that you have seen on your margin performance this time. It slipped about 200 bps in this quarter itself. Do you expect that to continue? A: For the first half of the year, we have faced about only 20 bps slip in gross margin. Reason for the profitability drop is the cost increase on overhead and no growth in the top-line adequately. The margin position is not bad at all. Q: Do you see further pressure on margins going forward? Will they stabilise around these levels for the second half of the fiscal? A: No, if we grow the top line, then the overhead should be absorbed and that will happen in the second half. Q: The company recently has made some big ticket announcements about allocating Rs 300 crore towards advertising spends, celebrity endorsements etc. Do you think in times when the overhead costs like power is a challenge the allocation may shave off margins and profits a little more? A: We should be able to do about 50 bps lower than last year. The Rs 300 crore advertising spend is over three years not only for this year.