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Mcleod Russel India reports 87.9% Net Income decline and 8.0% Revenue decline

28-05-2015 • About Mcleod Russel India ($MCLEODRUSS) • By InTwits

Mcleod Russel India reported FY2015 financial results today. Overall the company's long term financial model is characterised by the following facts:
  • Mcleod Russel India is a company in decline: FY2015 revenue growth was -8.0%, 5 years revenue CAGR was -3.3%
  • EBITDA Margin is declining: 8.1% in FY2015 vs. 20.4% in FY2014 vs. 28.5% in FY2011
  • EBITDA Margin is quite volatile: 8.1% in FY2015, 20.4% in FY2014, 23.2% in FY2013, 27.5% in FY2012, 28.5% in FY2011
  • Mcleod Russel India has medium CAPEX intensity: 5 year average CAPEX/Revenue was 8.0%. At the same time it's a lot of higher than industry average of 4.5%.
  • CAPEX is quite volatile: 1,614 in FY2015, 1,679 in FY2014, 999 in FY2013, 1,445 in FY2012, 624 in FY2011
  • The company has potentially unprofitable business model: ROIC is at 2.0%
  • It operates with high leverage: Net Debt/EBITDA is 4.2x while industry average is 2.5x
Below you can find a comprehensive analysis of the key data driving the company's performance and stock price.

Mcleod Russel India ($MCLEODRUSS) key annual financial indicators

mln. INR201120122013201420152015/2014
P&L
Revenue12,69214,45316,68617,88816,460-8.0%
EBITDA3,6183,9793,8633,6581,333-63.6%
Net Income2,4652,8792,7392,572312-87.9%
Balance Sheet
Cash211317439450396-12.1%
Short Term Debt6911,0402,2282,2133,38452.9%
Long Term Debt1,4069402588262,633218.7%
Cash flow
Capex6241,4459991,6791,614-3.9%
Ratios
Revenue growth-34.9%13.9%15.4%7.2%-8.0%
EBITDA growth-0.3%10.0%-2.9%-5.3%-63.6%
EBITDA Margin28.5%27.5%23.2%20.4%8.1%-12.4%
Net Income Margin19.4%19.9%16.4%14.4%1.9%-12.5%
CAPEX, % of revenue4.9%10.0%6.0%9.4%9.8%0.4%
ROIC17.5%18.6%15.7%12.9%2.0%-10.9%
ROE17.1%17.6%14.8%12.5%1.5%-11.1%
Net Debt/EBITDA0.5x0.4x0.5x0.7x4.2x3.5x

Revenue and profitability


Mcleod Russel India's Revenue decreased on 8.0% in FY2015. Having declining revenue the company managed to increase EBITDA margin. EBITDA Margin jumped on 20.4 pp from 58.3% to 78.8% in FY2015.

Net Income marign dropped on 12.5 pp from 14.4% to 1.9% in FY2015.

Capital expenditures (CAPEX) and working capital investments


Mcleod Russel India's CAPEX/Revenue was 9.8% in FY2015. Mcleod Russel India's CAPEX/Revenue showed almost no change from FY2012 to FY2015. It's average CAPEX/Revenue for the last three years was 8.4%.The company has spent a lot to CAPEX (121% of EBITDA) which didn't stop revenue from falling.

Return on investment


The company operates at low ROIC (1.96%) and ROE (1.47%). ROIC dropped on 10.9 pp from 12.9% to 2.0% in FY2015. ROE dropped on 11.1 pp from 12.5% to 1.5% in FY2015.

Leverage (Debt)


Company's Net Debt / EBITDA is 4.2x and Debt / EBITDA is 4.5x. Net Debt / EBITDA surged on 3.5x from 0.7x to 4.2x in FY2015. Debt jumped on 98.0% in FY2015 while cash dropped on 12.1% in FY2015.

Valuation


The company's trades at EV/EBITDA 23.5x and P/E 82.5x while industy averages are 10.5x and 26.1x.

Appendix 1: Peers in Tea & Coffee


Below we provide Mcleod Russel India benchmarking against other companies in Tea & Coffee industry for the last 5 years. We show data for the top-5 companies by key financial metric together with the median value for all the companies in the industry.

Top companies by Revenue growth, %

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
Rossell India ($ROSSELLIND)-51.1%5.4%27.9%33.6%
Andrew Yule & Company ($ANDREWYU)-40.5%17.1%4.7%19.3%
Warren Tea ($WARRENTEA)40.0%0.9%-44.0%17.7%
Bombay Burmah Trading Corp ($BBTC)15.7%10.0%11.5%12.7%
Ccl Products (India) ($CCL)38.0%29.6%10.2%22.8%
 
Median (11 companies)-40.5%16.4%7.4%9.9%4.9%
Mcleod Russel India ($MCLEODRUSS)13.9%15.4%7.2%-8.0%


Top companies by EBITDA margin, %

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
Rossell India ($ROSSELLIND)32.2%31.0%27.5%26.5%
Warren Tea ($WARRENTEA)19.0%7.9%17.7%21.8%
Ccl Products (India) ($CCL)18.0%20.3%20.1%21.5%20.6%
Tata Coffee ($TATACOFFEE)19.8%12.8%19.2%19.9%20.2%
B & A ($BNALTD)18.4%17.1%17.1%14.8%
 
Median (11 companies)14.1%8.4%13.7%9.7%12.7%
Mcleod Russel India ($MCLEODRUSS)28.5%27.5%23.2%20.4%8.1%


Top companies by CAPEX/Revenue, %

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
Rossell India ($ROSSELLIND)3.3%11.0%6.7%14.8%
Ccl Products (India) ($CCL)12.0%11.1%5.8%8.3%2.4%
Jay Shree Tea & Industries ($JAYSHREETEA)10.7%4.5%3.7%6.4%3.5%
Tata Coffee ($TATACOFFEE)1.9%3.2%4.3%4.0%3.6%
Tata Global Beverages ($TATAGLOBAL)1.7%2.0%2.4%2.6%2.2%
 
Median (9 companies)4.3%4.5%3.6%2.6%2.4%
Mcleod Russel India ($MCLEODRUSS)4.9%10.0%6.0%9.4%9.8%


Top companies by ROIC, %

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
Warren Tea ($WARRENTEA)19.3%4.3%12.7%25.7%
Bombay Burmah Trading Corp ($BBTC)9.4%10.7%13.9%20.6%23.7%
Ccl Products (India) ($CCL)9.7%16.1%18.0%19.7%23.0%
Goodricke Group ($GOODRICKE)27.7%13.0%20.9%16.8%
Tata Coffee ($TATACOFFEE)15.7%10.9%16.2%14.0%14.0%
 
Median (14 companies)9.7%9.4%12.7%14.0%14.0%
Mcleod Russel India ($MCLEODRUSS)17.5%18.6%15.7%12.9%2.0%


Top companies by Net Debt / EBITDA

Top 5 FY2011 FY2012 FY2013 FY2014 FY2015
Jay Shree Tea & Industries ($JAYSHREETEA)5.9x8.6x4.5x8.2x19.5x
Tata Coffee ($TATACOFFEE)2.7x3.6x2.6x2.7x2.5x
Andrew Yule & Company ($ANDREWYU)4.3x2.1x5.4x1.9x
Ccl Products (India) ($CCL)3.7x2.6x2.3x1.7x1.1x
Rossell India ($ROSSELLIND)0.4x0.0x1.9x1.5x
 
Median (13 companies)2.5x2.1x1.9x1.0x1.1x
Mcleod Russel India ($MCLEODRUSS)0.5x0.4x0.5x0.7x4.2x


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