ISSN (Print) - 0012-9976 | ISSN (Online) - 2349-8846

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Cost Squeeze

Hansavivek MANGALAM CEMENT, which cleared arrears of preferential dividends last volar, has annonced a maiden equity dividend of 12 per cent for 1983. The company has produced good working results, with increase in production of cement from the previous year's 2,28,721 tonnes to 3,00,144 tonnes, and increase in capacity utilisation from 57 per cent to 75 per cent. Sales realisation amounted to Rs 20.58 crove against Rs 14.89 crore previously, while gross profit was Rs 4.06 crore against Rs 3.62 crore. These figures reflect a notable fall in profit margins. After providing Rs 2.73 crore (Rs 1.59 crore) for depreciation, net profit has turned out to be lower at Rs 1.33 crore (Rs 2.03 crore). Equity distribution is thus covered 1.87 times by earnings. Production would have been substantially higher, but for the excessive power shortage in the first half of the year. With the commissioning of two imported diesel generating sets, the company has been able largely to over come power problem, although violent voltage fluctuations and too many power interruptions still continue which not only adversely affect output but also cause damage to plant and machinery. There has been further deterioration in the quality of coal. Directors point out that caloric value is very low with high ash, shale and content moisture. They attribute deterioration of margins in spite of the higher production to the steep rise in costs of important inputs such as power, coal, stores and spares, and salaries and wages. Average power rate per KWH increased 'from 33 paise to 52 paise, and the average factory landed cost of coal per tonne from Rs 295.10 to Rs 379.23. Recent increase in the rate of coal by about 25 per cent will also adversely affect profits in the current year. there is one good news. Government has acceded to the company's request for treating its plant as a new unit for purpose of determining levy quota. Accordingly its levy quota has been reduced. The benefit of this will accrue to company in the current year. Government, however, has not so far granted any increase in the price of levy cement since the announcement of new pricing policy on February 28, 1982. Prices of non-levy cement have also declined lately. The final award of the board of arbitration for the cement industry

Free of FERA

Free of FERA Hansavivek DUNLOP INDIA is no longer subject to restrictive aspects of FERA. With completion, in December last, of the two-stage conversion of the convertible part of company's 13.5 per cent secured convertible debentures. Indian shareholding in the company has increased to over 60 per cent. The com pany continues its phased programme of modernisation and energy conservation. This programme is supplemented by ongoing expansion into new and improved product lines, such as steel cord conveyor belting, new varieties of industrial adhesives, large diameter hoses, specialist automotive and industrial Vee belts, radial tyres for new motor cars, ultra-large tyres for off- the-road vehicles and an increase in production volume of tyres for scooters and motor cycles. Sales have declined from the previous year's Rs 244,52 crore to Rs 239.03 crore, and gross profit from Rs 15.33 crore to Rs 14,37 crore These figures also show reduced margins. With both depreciation and taxa tion requiring more, net profit has tumbled, from Rs 9.64 crore to Rs 5.70 crore. Dividend is maintained at 20 per cent on increased capital and is covered 1.77 times against 3.19 times previously. The volume of tyre production was marginally lower than in 1982, owing to lower demand for truck tyres and production disruptions on account of power shortages at Ambattur in the first half of the year, A number of new products were introduced in tyres notably for Maruti car, power plus high performance truck tyres, and nylon tyres for motorcycles and scooters. Modernisation of plants continued, with installation of additional Bag-O-Matic presses for car, light trucks and motor cycle tyres, Production of industrial products increased marginally. A new plant for the production of industrial hoses was commissioned and high pressure hydraulic hoses were added to the expanding industrial products range. Escalation of electricity costs continu- ed with tariff increases and increased need for captive electrical generation at both Sahaganj and Ambattur. Poor quality of coal remains a problem. Domestic rubber prices rose to high levels because of delay in import and distribution of rubber. Increase in import duties, imposition of additional excise duty on rayon and nylon tyrecord. and higher administered price of coal, have increased costs. The company also had difficulties in getting supplies of certain key materials due to industrial relations problems at the suppliers' factories. Tyre market felt the impact of a slackening of road transport activity, and competition on prices was intense. Turnover for tyre products declined by 8 per cent from 1982. mainly with lower selling prices of truck tyres. Government reduced excise duty rates on certain categories of tyres in October last and the reduction was to be passed on to consumers. In line with the company's commitment to provide better service to consumers, Dunlop Tyres Service Centre network continues to be extended. Four new centres were The Week's Companies (Rs Lakh)

Courtesy, Capital Goods Imports

Courtesy, Capital Goods Imports Hansavivek PEICO ELECTRONICS AND ELECTRICALS has received a number of letters of intent, industrial licences, and regulation of capacities covering ia wide range of products. In the electronics components field, it has got letters of intent not only for expansions in a number of existing components manufacture but also for a whole range of new items. Arising from these various letters of intent and industrial licences, the company would have to expand production capacities of variable con- densors, electrolytic capacitors, potentiometers, loudspeakers, and ceramic capacitors in the coming years, in the field of lamp components, the company has received industrial licences for dumet and component wires, which are vitally needed in manufacture of lamps. Reguliarisation of radio capacity in Calcutta, and letters of intent for micro motors, tape desk medianisms, and magnetic heads, have -made it necessary for the company to plan for a major new audio complex in Salt Lake City near Calcutta. Oscilloscopes, frequency counters and timers, and portable diagnostic ultra-sound instruments, (are new letters of intent for the professional electronics equipment factory at Pune. A modern, environmentally-controlled factory has been recently completed at Pimpri near Fune, Receipt of a letter of intent for x-ray diagnostic systems heralds For the company yet another major step. According to C J Seelen, Chairman and Managing Director, a more pragmatic government policy towards capacities and a liberal arjproach to imports of machinery and capital goods has enabled the company to implement its plans to -modernise and expand capacities which could lead to reasonable economies of scale. The company has suffered a sharp setback in its performance in 1983, due to industrial relations in its factories in general and in the Pune factories in particular. There was a prolonged cessation of work and it affected sales and profitability severely. To ensure supplies to dealers and consumers, management procured goods from alternative sources, while safeguarding the company's quality standards. Although sales increased from Rs 162.77 crore to Rs 164.85 crore, gross profit was only Rs 8,24 crore against Rs 15.04 crore in previous year. Net profit also dropped, from Rs 6.15 crore to Rs 1.70 crore. Dividend has been lowered by 2 points to 16 per cent, a half of which is short- earned. Last year's higher distribution was covered 1.33 times by earnings, During latter part of the year, government announced a series of reductions in excise and customs duties and the company passed on the benefits of all these reductions to consumers. These reductions covered the entire range of company's products

Expansion on Sure Base

Expansion on Sure Base Hansavivek BARODA RAYON CORPORATION is processing ft letter of intent for raising nylon tyrecord capacity from 2,000 tonnes to 4,000 tonnes per annum. Meanwhile, it has received an industrial licence to step up nylon tyrecord fabric capacity from 1,700 tenner to 3,400 ton- nes per annum. The company is implementing, in stages, the modernisation of nylon and polyester plants and the management expects lull benefit to be realised on completion of this programme next year. Civil construction work on mono ethylene glycol recovery plant has commenced and orders for equipment are being placed. Meanwhile, equipment and machinery for the nylon tyrecord labile section was commissioned last year, increasing the capacity to 1,700 tonnes per annum. The cap- rolactum recovery plant has also been put into operation. The R and D department contributed in good measure to improving manufacturing efficiency. The company spent Rs 38 lakh on R and D last year, and intends to strengthen it further by spending a further Rs 125 lakh in the current year. The company has been able to show higher production and sales in spite of problems in the rayon division, which has been beset for some time with a sharp full in offtake and consequent decline in market prices. Production of nylon yarn increased by 31 per cent, from 2,227 tonnes to 2,910 tonnes and nylon tyrecord by 26 per cent from 1,767 tonnes to 2,234 tonnes. Polyester filament yarn production was 1.267 tonnes, against 1,229 tonnes of the previous year. Although the rayon division worked at optimum capacity, it produced 4,031 tonnes against 4,267 tonnes previously. as management planned to lower average denier to combat depressed market conditions total net sales were Rs 70.06 crore, against Rs 60,68 crore, but gross profit increased only .slightly from Rs 8.67 crore to Rs 8,90 crore relieving a marked dimunition of margins. With both depreciation and taxation claiming less than they did last year, net profit has increased from Rs 3.18 crore to Rs 4.43 crore. Unchanged dividend of 15 per cent is covered 2.30 times by earnings as against 1.63 times previously. To augment long-term resources for increased working capital requirements, the company has raised Rs 6 crore by issue of 6 lakh 15 per cent secured non-convertible debentures of lis 100 each. Commenting on the current year's prospects, the directors say that demand for nylon and polyester yarns has remained steady in the first quarter though prices realised have not. been remunerative. Steps taken by govern, ment to increase import duty on rayon yarn and the permission to allow export of 120 denier yarn arc inadequate in solving the problems of indigenous manufacturers. Current selling prices continue to be unremunerative. With the nylon tyrecord fabric expansion, the working of this division has further improved, as the company is in a position to convert its entire production into fabric at its own plant.

Higher Dividend on Lower Profit

Higher Dividend on Lower Profit Hansavivek GOODYEAR INDIA has shown very poor working results lor 1983 owing to cost increases, uneconomic selling prices, lower production initially caused by shortage of moulds and subsequently by power problems. Power outages of proportions unprecedented in the factory's 22 years' history persisted throughout year

Coping with Demand Constraints

io sell to Reliance Textile Industries chemicals and plastics business comprising of its plant located at Chembur in Bombay and sales and administrative offices, together with related technology for Rs 24.50 crore. Manufacturing facility for acetylene black, which is covered under a separate industrial licence but located at same address, will not be sold. Relatively stagnating and diminishing growth opportunities for company in this field, non-avtiila- hility of gas at economic prices, present trend of setting up plants of similar products with larger capacities are some of reasons which have led management to the decision of selling this business. RTI has agreed to continue employment of all employees employed at the chemicals and plastics unit and connected administrative/sales offices at Bombay, Baroda, Calcutta, Delhi and Madras on terms not less favourable than those which they enjoy currently with UCI without interruption in service and to take full responsibilities for The Week's Companies cause of import of new products like synthetic pyrethroids as well as accumulation of large inventory from previous year due to drought conditions in that year. Measures taken for conservation of energy and feedstocks at chemicals and plastics plant and reduction in pass fee on alcohol enabled company to improve its yields and margins on chemicals and low density polyethylene. Exports dropped by 30 per cent to Rs 7.0 crore due to worldwide recession and reduced offtake In USSR. Facility for processing marine products at Vizag was closed in November last, as operations had become uneconomical. Company's batten plant at Sii- nagar in J and K has gone into commercial production.

Weathering the Automobile Recession

Weathering the Automobile Recession Hansavivek MAIUNDRA AND MAHINDRA has achieved higher production and sales of jeeps, commercial vehicles and tractors during 1982-83. There is increase in turnover from Rs 269.08 crore to Rs 314.01 crore, but gross profit is lower at Rs 22.63 crore against Rs 23.73 crore in previous year, reflecting a mar- ked contraction of margins. This outcome has followed because of company maintained selling prices throughout the year, while costs continued to rise. Interest cost alone rose from Rs 8.99 crore to Rs 13.36 crore owing to large expenditure incurred on schemes for expansion and modernisation of facilities. Arising from increase in assets, depreciation has also claimed more, but there is a saving in tax liability and net profit has turned out to be higher at Rs 13.52 crore than previous year's Rs 11.18 crore. Equity dividend has been maintained at 20 per cent and is covered 5.82 times as against 4.85 times. Automotive division produced 32.077 The Week's Companies vehicles and sold 32,301 against 27,928 and 28,153, respectively, in 1981-82, Sales of spare parts, inclusive of petrol and diesel engines, were also higher. In spite of recessionary trends in industry, company was able to increase its share of light commercial vehicle market from 35.6 per cent to 41.5 per cent owing to greater availability and acceptance of Peugeot engines. Igatpuri engine factory achieved 60 per cent indigenisation and expects to reach 100 per cent by 1985. Tractor division produced and sold 11,901 and 12,507 units as against 11,751 and 11,064 units, respectively, in previous year. Tractor market showed an improvement due to partial relaxation in credit policy of RBI resulting in availability of bank loans to a greater extent to farmers to purchase tractors. Sales of spare parts. kits, attachments and implements were also higher. Tractor division commenced commercial production of 50 HP tractor, designed and developed by com pany. Total foreign exchange earnings from exports of vehicles, tractors, spare parts, merchant and deemed exports amounted to Rs 29.73 crore. Despite severe crisis, which steel industry is facing all over world, operations of steel division yielded some profit. Sales of instrumentation division were lower due to continued recession in user industries. Order intake of hydraulic regulators (in phased manufacture under new collaboration with Comp Air of UK) was also adversely affected due to current recession in steel industry. Machine tool division executed orders of Rs 3.85 crore compared to Rs 4.02 crore in previous year. Reluctance of user industries to acquire new capital equipment affected order book. Several new lines of representation, par icularly from Japan, have been added and order book is being rebuilt to required level. Company's ongoing programme for modernisation and expansion of facilities in automotive and tractor divisions involving a capial outlay of Rs 75.78 crore is in an advanced stage of completion. It is expected to be completed during current year. To (Rs Lakh)

Accent on Overseas Operations

Hansavivek KAMANI ENGINEERING CORPORATION has turned in good results for year ended September 1983. Gross profit has expanded from previous year's Rs 4.96 crore to Rs 6.42 crore following increase in turnover from Rs 50.24 crore to Rs 63.84 crore. These figures also reflect an increase in margins. Since both depreciation and taxation have taken away more, net profit has turned out to be lower at Rs 3.04 crore (Rs 3.26 crore). Equity dividend, maintained at 20 per cent, enjoys a hefty earnings cover of 10.06 times as against 10.80 times previously. Company has allotted gift shares on a one-for-one basis, but these shares will participate in dividend from current year. Despite recession in export and indigenous markets, company has been able to secure orders of about Rs 40 crore for supply and construction of transmission line lowers and line materials. As a part of diversification programme, company has secured an order for specialised civil work of construction of a 150-metre high RCC chimney from Maharashtra State Electricity Board. Work is already in progress. After completing rehabilitation work in respect of mini-steel plant at Bhav- nagar, company commenced production there in June 1983 and produced about 4,000 tonnes of billets.

Diversification from Textiles

Diversification from Textiles Hansavivek CENTURY SPINNING AND MANUFACTURING COMPANY is going ahead with its diversification projects. It has got a mining lease for limestone mines for Manikgarh cement project from government of Maharashtra, Since major part of area fails under 'reserved forests', clearance from Central government is awaited under Conservation of Forests Act. Meanwhile shipments of imported equipment and despatch of indigenous equipment have started. Civil construction work is in progress. UP government has finally released land required for company's rayon pulp and paper projects. Construction work is in full swing and erection of machinery has also commenced. Both plants are expected to go into commercial production during second half of this year. State government has decided to modify its original order fixing price of timber to be supplied to company. Recent prices and other terms indicated by state govern- The Week's Companies ment are prohibitive. Directors have taken up the matter with state government and they hope that a reasonable solution acceptable to both parties will be found.

Diversified Growth

Diversified Growth Hansavivek EXCEL INDUSTRIES has fared so well during 1982-83 that it has announced a gift of shares on a four- for-five basis besides a dividend of 25 per cent against 20 per cent paid last year. Production, sales, profits as well as margins are all ahead of their respective levels of Iast year. Sales have expanded from Rs 27.90 crore to Rs 37.90 crore and gross profit from Rs 2,61 crore to Rs 4.58 crore. Net profit is Rs. 2.82 crore (Rs 1.54 crore). Enhanced distribution is covered 4.41 times by earnings as against 3.02 times previously. Company has done better on export front too, with exports amounting to Rs 3.76 crore against Rs 2.34 crore. It won first award instituted by Basic Chemicals, Pharmaceuticals and Cosmetics Export Promotion Council for export performance in inorganic and organic chemicals including agro- chemicals panel. Moreover, Kantisen C Shroff, Joint Managing Director, has been chosen 'Environmentalist of the year 1983 for outstanding contribution to field of industrial pollution control.

Fall-Out of Textile Slump

Fall-Out of Textile Slump Hansavivek ZENITH STEEL PIPES AND INDUSTRIES has suffered a sharp setback in its working during year ended June 1983 with drop in gross profit from Rs 3.13 crore to Rs 1.89 crore even though sales have been higher at Rs 81.16 crore against previous year's Rs 78.24 crore. Net profit has tumbled to a mere Rs 36 lakh from Rs 229 lakh. Even reduced dividend of 10 per cent is short-earned, whereas last year's distribution was covered as much as 3.22 times by earnings. Average capacity utilisation of pipe plant was at the lowest. Recession in textile industry adversely affected demand for products of chemical division. Increase in import duty of high speed steel from 55 per cent to 93 per cent adversely affected profitability of tools division. Though spinning unit of Khamgaon unit has achieved full rated capacity, textile industry continues to face its worst crisis ever. Due to recessionary trend in world market and resultant intense competition, company's exports fell to Rs 8.94 crore from previous year's Rs 10.02 crore.

Turning to Indigenous R and D

Turning to Indigenous R and D Hansavivek IDL CHEMICALS has fared well during year ended June 1983 and is stepping up dividend from 15 per cent to 18 per cent. Future outlook is promising, as company continues to expand its activities. New project for manufacture of 1,440 tonnes of PETN per annum, being established at Bhiwandi in Maharashtra, is coming up satisfactorily. Orders for plant and machinery, both imported and indigenous, have been placed. Metal cladding division has got a letter of intent for manufacture of 30,000 tonnes per annum of hot rolled cladded coils of stainless steel/mild steel and 2,000 tonnes per annum of hot rolled non- ferrous cladded materials. Wholly- owned subsidiary, IDL Agro Chemicals, is now developing indigenous technology through national laboratories in India for manufacture of sophisticated agro chemicals and speciality chemicals, as technical collaboration earlier proposed with KenoGard of Sweden has not been found economi cally viable. So far this unit has been engaged in trading activities.


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