The results for the first quarter to June 30, 1999 show a net profit of Rs 1.80 crore against Rs 1.74 crore in the corresponding quarter of 1998. Net sales increased, quarter to quarter, by 19.5 per cent to Rs 13.71 crore from Rs 11.48 crore.

In the first quarter of 1999-2000, other income was substantially higher at Rs 0.70 crore against Rs 0.06 crore in the comparable quarter. Interest costs were lower at Rs 0.14 crore against Rs 0.25 crore. Depreciation charge was marginally higher because of the acquisition of KSR International during the year.

According to the company, growth in profits in the first quarter did not keep pace with sales due to introduction of new products, mainly monolithic KSR. However, the company expects profitability to improve in the remaining part of the year on theassumption that steel industry will do better than last year.

It is also learnt that the introduction of slide gate equipment has been successful and is contributing signicantly to turnover and profits of the company. Margins on slide gates are improving and according to industry sources, its contribution to revenues is likely to improve further in the coming years.

The company is also believed to be gearing up to have a separate facility for the manufacture of KSR range of products which it acquired as a result of the Rs 2.5 crore acquisition earlier this year.

Insight

Although the sales of company in the first quarter are up by 19.42 per cent, the operating margins are down to 20.6 per cent compared to 33.02 per cent in the same period last year. One reason could be the steep depreciation of the rupee by more than 10 per cent. Since 80-90 per cent of the raw material is imported and raw material forms the bulk of manufacturing cost, higher raw material cost affected the margins.

Theintroduction of new products have also not helped the company as the margins in the new products is lower.

Other income has buoyed earnings, and in this quarter is as much as 31 per cent of the profit before tax. Earnings in Q1, 1999-2000 are lower than that of the fourth quarter of 1998-99, which was supposed to be an aberation in the continious good performance of the company. The reaction of the stock market may be similar to that of the fourth quarter results, when the stock had fallen from a high of Rs 138 in march 1999, to as low as Rs 88 in may 1999. The silver lining, however, could be the rise in steel production witnessed in the first quarter, which can push demand for refractories in the coming fiscal. But the key to higher earnings would depend on the ability of the company to push for higher realisations.

Manish Saxena