Part 2 of my Analysis of Purchase delves into the business unit analysis for GRP. Most companies have one very strong division which carries the whole company through and is the mainstay cash cow, just like MTQ’s Oilfield Engineering division with its high margins and steady cash flow compared to the low margin Engine Systems division. For GRP, the same scenario plays itself out again for Hoses and Marine versus uPVC Pipes and Fittings.
Business Unit Revenue, Gross and Net Margin Breakdown (2002-2005)
Interestingly, one can observe that for FY 2002 and FY 2003, Measuring Instruments division made up the bulk of revenues as compared to later years when the Hoses and Marine division was more established. But for the bulk of FY 2002 to FY 2005, measuring instruments still made a significant impact to revenues, as a result of GRP’s representation for several international brands such as Imada, Vision and Motic. They had also represented Mitutoyo in the ASEAN region for 44 years, and thus had built a strong track record in this industry.
In terms of gross profits however, it is hoses and marine which still took up the bulk of it, and the gross margins are apparently much higher for Hoses and Marine (at 40.9% for FY 2004 and 53.7% for FY 2005) as compared to Measuring Instruments (26.9% in FY 2004 and 23.6% for FY 2005). uPVC Pipes, it seems, was an under-performing division which contributed little to gross profits and also had a low gross margin of average 18% over FY 2004-FY2005. Read more...