Cost control helps Blue star India achieve better profitability in Q2 FY13

MUMBAI: Blue star India’s share surged by over 3% on the exchanges at the of the day’s trade on Friday as the company posted net profit of over Rs 7 crore for the September ’12 quarter against a loss of over Rs 20 crore posted by the company in the September ’11 quarter.

Sequentially, however, the company’s net profit has declined by over 64% from Rs 20.54 crore in Jun’12 quarter.

Significant reduction in its costs, especially that of raw material, has helped Blue star post an operating profit margin of 2% for the quarter despite a 3% decline in the top-line (revenues) year on year.

Blue star’s raw material cost as a percentage to sales has dipped from 68% to 58% year on year. The company has also cut down on its other expenditure by over 5% year on year. A sharp decline in the interest costs has also helped the company post better profits. Blue star paid about Rs 11.2 crore as interest expense during the quarter against Rs 30.56 crore paid in Sep ’11 quarter.

As far as segmental performance is concerned, the company has improved its margins in the Electro Mechanical Projects & Packaged Air-conditioning Systems from –0.9% to 7% y-o-y. However, its margins in the Professional Electronics and Industrial Systems have come down significantly from 29.2% to 7.7% y-o-y. This segment however accounts for less than 6% of the company’s total revenues.