The company's turnover more than doubled to Rs 379.49 crore from Rs 175.22 crore during the period with additional revenues being generated by the copper division which was commissioned during the first quarter.

The company's fertiliser business fared well despite a significant slide in international prices, with f.o.b (free on board) prices of urea dipping to around $70 per tonne against around $90 per tonne during the same period last year.

The fertiliser division, with a turnover of Rs 221 crore during the quarter, registered a 27 per cent growth against that of last year. The company has said that the current trend shows that the plant will achieve production of over 1million tonne for the full year.

Its `Shaktiman' brand of urea continued to maintain its leadership position in its primary markets, it said in a press release.

The company's interest outgo rose considerably during the nine-month period primarily due to fresh loans taken for the copper division, which accounted for almost 90 per cent of the Rs 42.55 crore interest outgo.

Depreciation was also higher at Rs 48.58 crore, compared with Rs 28.90 crore in the nine-month period last year.

Indo Gulf performance way off projections

Indo Gulf Corporation is unlikely to meet its revenue projections in the first year since commissioning the copper smelter due to the steep fall in international copper prices.

While the company projected that it will gross Rs 842 crore in the first year at 60 per cent capacity utilisation from the copper business alone, in the first nine months it has grossed just Rs 438.95 crore. During this period, it operated at 70 per cent capacity utilisation.

The projectionsmade in early 1998 were based at London Metal Exchange (LME) prices of $1,775 per tonne. However, over the last year due to the Asian meltdown, LME prices have dipped considerably and are currently ruling at below $1,500 per tonne levels.

Analysts said that low offtake from the south-east Asian countries have depressed international prices, resulting in lower sales realisation for the company.

However, Indo Gulf's margins are not expected to be affected significantly as it imports its entire requirement of copper concentrate, the primary input, which is also linked to the LME.

"If copper prices dip on the LME, so will the prices of copper concentrate. Hence, though Indo Gulf will find it impossible to meet the revenue projections, margins are unlikely to be affected adversely," analysts explained.

The company has produced at higher capacity utilisation levels primarily to offset the notional loss due to lower sales realisation, they added. Company officials were not available for comment.

Indo Gulfhad also projected a turnover of Rs 1,200 crore for the second year at 85 per cent capacity utilisation.

The company, which announced its results on Thursday, also said that its CC rods and cathodes have been very well received in the market by its user industries, namely electrical, telecom, power and transportation. It has already notched up a marketshare of around 40 per cent in nine months of commissioning the copper smelter.

Insight

Profitability may be hurt in long run

The agri-product division of Indo Gulf Corporation continues to perform in line with market expectations. However, the company's stock has been taking a beating on the bourses. The reason for this appears to be the company's strained cash flow situation resulting from huge investments in the copper division. There is little doubt that the copper division will only add to the overall profits of the company, but as smelting is a low margin business, overall profitability is bound to fall. Besides, for the nextfew years, high interest outgo and depreciation charges will continue to have a dampening effect on the company's net profit.