The company turned its operations around last year after some spectacular marketing successes with its main optical brands. The first quarter reflects a continuation of these successes, with revenues growing by 33 per cent and net profit by 55 per cent, thanks mainly to debt repayment and lower interest cost. Not surprisingly, the stock has continued to find favour in the market, despite having climbed by 64 per cent in the last six months to Rs 125.

Trafalgar House's story is similar. This company also made a rights issue at the same time as B&L at a high price. But unlike B&L, the parent company chose to raise its stake to 64 per cent. The valuationsfor this stock also began to change for the better around the same time. The first-quarter results did not belie expectations. The company has reported a revenue growth of 38 per cent, and declared an interim dividend of 15 per cent, as lower interest costs pushed up the net profit. The stock continues to do well, despite having appreciated by 58 per cent since its stake hike in October 1997.

Roofit Industries:

The last one year has proved to be a surprisingly good one for Roofit Industries, despite the slowdown in its industry segment, with which its fortunes directly correlate. Revenues have increased (on an annualised basis) by 35 per cent to Rs 72 crore over the previous 15-month period. This figure includes a strong growth performance for the last quarter ended June 30, 1998, during which it reported a 31 per cent growth over the previous year's corresponding period. Margins improved from 22 to 23 per cent for the whole year, led by a traditionally buoyant last quarter, where margins weresteady at 23.5 per cent.

To some extent, this growth has been fuelled by a rise in volumes, by virtue of its new 45,000-tonne plant running at a higher capacity utilisation (total capacity 1,35,000 tonnes). Volumes have grown by 42 per cent in the last year. Prices have been under pressure, but the operating efficiency has improved. Roofit Industries and the asbestos cement industry leader Eternit Everest are the only two companies that have not diversified (except for Roofit's foray into cement, which is more of a backward integration rather than a diversification) to counter the cyclicality in this business. Eternit Everest, on its part, has reported a growth of just 4 per cent for its first half ended June 1998, but it has suffered a fall in profits by 54 per cent. Some benefits will accrue to companies that are engaged in the AC sheets business following the union budget for 1998-99.

Excise duties have once again been reduced to zero on all asbestos products that consume flyash in excess of 25 percent of its raw-material cost. Companies like Roofit are well placed to take advantage of this, once gain. The company was a major beneficiary the last time round when duties were similarly reduced to zero, before being reimposed by the previous budget. But the decision to produce its own cement will not be such a wise decision, as the price of cement has fallen to such an extent that it could have reduced raw-material costs, without needing a heavy capex. Besides, the plant size is small--just 60,000 tonnes.

Further, the negative aspect of the budget has been dulled to some extent. Companies in the AC sheets business are dependant almost entirely for their requirement of asbestos fibre on imports. Here the depreciation of the rupee hurts margins, and so do higher import duties. In Roofit's case alone, the imports of asbestos fibres increased in value terms by a substantial amount from one quarter of its imports to one-third of its raw materials. Its margins for 1997-98 improved as a result of significantcost cutting. But the move to include the import of asbestos fibres for levying the additional countervailing duty of 4 per cent will not help margins at all.