Competitive pressures thanks to the recent capacity expansion and delicensing of asbestos cement products has affected the margins of producers. Worse, the economic downturn has impacted profitability; companies are being forced to offer huge discounts to bring down inventory levels. This has led to firms diversifying into other businesses in order to escape the gloomy scenario in the asbestos cement sector. Surprisingly on the bourses, these companies have been faring wellnotwithstanding their losses or a relatively flat earnings growth.

Despite a poor performance (net loss of Rs 3 crore) for the quarter-ended December 1998, Eternit Everest has appreciated by 23 per cent in just five trading sessions. Hyderabad Industries, a C K Birla group company, has risen by 25 per cent since June 14, while the relatively unknown Visaka Industries has zoomed by almost 50 per cent for the period under consideration. Roofit Industries, which has now dropped by 2 per cent to Rs 98, had already zoomed from Rs 72 to over Rs 100. Malabar Building Products is yet another asbestos cement producer which has gained more than 20 per cent in the last five trading sessions -- from Rs 14 to Rs 17.

The uptrend in the Eternit Everest stock has been aided by the Supreme Court judgement, which favoured the company by rejecting the government's demand for payment of additional customs duty. Consequently, the company has said it will write back provisions made in the earlier years amounting to Rs 7.84crore. The rise in Roofit Industries has been triggered off by reports of the company embarking on a restructuring exercise. The acquisition of the asbestos cement pipe division of Sun Earth Ceramics may have also boosted sentiments.

Hyderabad Industries is now concentrating on its heavy engineering division and has identified ports and power as its main thrust areas. The division makes hydraulic excavators, mechanical crawlers, electrically operated cranes, gantry and tower cranes, dragline buckets, shovel buckets, heavy duty gears and gear boxes. Its steel foundry division is claimed to be well-equipped and undertakes turnkey projects for coal, steel and cement plants. For the quarter-ended December 1998, the company had incurred a net loss of around Rs 8 crore. Visaka Industries has also incurred a net loss of Rs 89 lakh for the quarter ended December 1998.