CUMI rolls with the economy

Chennai: The buoyant economy has positively rubbed on the Murugappa Group's abrasives company Carborundum Universal Limited (CUMI). The company closed fiscal 2006-07 with a turnover and an after tax profit of Rs526.77 crore and Rs58.66 crore respectively. The previous year the company posted a turnover of Rs424.24 crore and an after tax profit of Rs76.61 crore respectively.

According to the company in 2005-06 there was an exceptional item of Rs 32 crore being profit on sale of investments, which accounted for the profit before and after tax being higher than that of that for 2006-07.

During the year under review, FY07, the company's domestic sales grew by 21 per cent from Rs378 crore to Rs456 crore. The increased pace of economic growth in India, together with company's product, market and customer initiatives resulted in overall expansion of the market for the company's products. CUMI experienced strong growth in all three business segments viz. abrasives (21 per cent), ceramics (17 per cent) and electro minerals (32 per cent).

On the exports front the turnover increased from Rs47 crore to Rs71 crore, a growth of 52 per cent. Strong growth was achieved in all the product lines - abrasives grew by 35 per cent, ceramics by 56 per cent and electro minerals by 126 per cent. The strong export performance was an outcome of the increasing visibility for the company's products in the international markets created by the marketing initiatives of CUMI's subsidiaries / offices coupled with increased product acceptance from well established customers.

However, the interest costs have risen by over 150 per cent last fiscal to Rs7.12 crore from Rs2.81 crore as a result of the aggressive capital investments in building a strong back end, the benefits of which will be reaped over the next one to three years. According to the company, Rs108 crore was spent as capex last year. Including this amount, the total capex incurred by CUMI in the last three years is Rs215 crore.

The company completed the acquisition of 49 per cent stake in Sanhe Yanjiao Jingri Diamond Industrial Company Ltd. (Jingri) in October 2006. The acquisition has helped to fulfil the long-felt need for a Chinese manufacturing base. The joint venture is in the process of setting up a bonded abrasive manufacturing facility for commissioning in 2007-08.

The board has recommended a dividend of 75 per cent (i.e. Rs1.50 per equity share of Rs2 each) for 2006-07. Last year a dividend of 180 per cent (which included a one-time special dividend of 120 per cent in view of the significant income arising from sale of investments) was paid.

At the company's latest board meeting Sridhar Ganesh, director - HR of the Murugappa Group was inducted as a director.