How has been the historical performance of Star Paper Mills?

Revenue Growth and Operating Income

Over the period under review, Star Paper Mills’ net sales increased from ₹317.16 crores in September 2007 to ₹360.21 crores by March 2009, reflecting a growth of approximately 13.5%. This rise in sales was complemented by a modest increase in other operating income, which grew from ₹6.45 crores to ₹7.37 crores. Consequently, total operating income expanded from ₹323.61 crores to ₹367.58 crores, signalling a steady top-line improvement.

Despite the growth in revenue, the company faced rising costs across several key expense categories. Raw material costs increased from ₹95.51 crores to ₹101.83 crores, while power costs surged significantly from ₹78.51 crores to ₹99.89 crores. Manufacturing expenses also rose from ₹74.13 crores to ₹89.99 crores. Employee costs saw a moderate increase from ₹35.54 crores to ₹39.22 crores. These cost pressures contributed to a rise in total expenditure (excluding depreciation) from ₹278.40 crores to ₹322.65 crores.

Profitability and Margins

Star Paper Mills’ operating profit before depreciation, interest, and tax (PBDIT) excluding other income remained relatively stable, with a slight dip from ₹45.21 crores in September 2007 to ₹44.93 crores in March 2009. However, the inclusion of other income, which rose from ₹0.54 crores to ₹3.69 crores, helped increase the overall operating profit to ₹48.62 crores by March 2009, up from ₹45.75 crores.

Interest expenses decreased from ₹11.23 crores to ₹9.43 crores, and the company reported no exceptional items in March 2009 compared to a negative ₹11.99 crores in September 2007. This contributed to a significant improvement in gross profit before depreciation and tax (PBDT), which rose from ₹22.53 crores to ₹39.19 crores.

Depreciation charges increased slightly from ₹16.12 crores to ₹17.79 crores, but the company’s profit before tax surged from ₹6.41 crores to ₹21.40 crores. After accounting for tax expenses, profit after tax (PAT) turned positive at ₹15.42 crores in March 2009, a marked improvement from a loss of ₹0.58 crores in September 2007.

Operating profit margins (excluding other income) declined marginally from 13.97% to 12.22%, while gross profit margins improved substantially from 6.96% to 10.66%. The PAT margin also turned positive, reaching 4.2% compared to a negative margin of 0.18% previously.

Cash Flow and Financial Position

Cash flow from operating activities decreased from ₹51.55 crores in September 2007 to ₹36.82 crores in March 2009, reflecting changes in working capital and operational dynamics. Cash flow from investing activities improved significantly, with outflows reducing from ₹27.64 crores to ₹1.80 crores, indicating lower capital expenditure or asset purchases.

Conversely, cash flow from financing activities showed increased outflows, rising from ₹22.79 crores to ₹36.33 crores, which may suggest higher debt repayments or dividend payments. The net cash outflow stood at ₹1.32 crores in March 2009, compared to a net inflow of ₹1.11 crores in September 2007. Closing cash and cash equivalents declined from ₹2.45 crores to ₹1.13 crores over the period.

Equity capital remained constant at ₹15.61 crores, while reserves grew from ₹87.34 crores to ₹99.22 crores, reflecting accumulated profits and retained earnings. Earnings per share (EPS) improved dramatically from a negative ₹0.37 to a positive ₹9.88, underscoring the company’s turnaround in profitability.

Summary of Historical Performance

In summary, Star Paper Mills has exhibited a significant recovery in its financial health between September 2007 and March 2009. The company managed to increase its sales and operating income while controlling costs sufficiently to improve profitability. The turnaround from a loss-making position to a positive net profit and EPS reflects effective management of expenses and enhanced operational efficiency.

Despite some pressure on operating margins, the improvement in gross profit margin and the elimination of exceptional losses contributed to a healthier bottom line. Cash flow trends indicate a cautious approach to investing and financing activities, with a slight reduction in liquidity levels. Overall, the company’s financial trajectory during this period suggests a stabilising and improving business outlook, which may be encouraging for investors seeking value in the paper manufacturing sector.

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