Compared to the second quarter of the current year, dispatches of India Cements (ICL) at 1.66 million tonne were 8 per cent higher. The income from wind mill division was insignificant at Rs 0.33 crore compared to Rs 0.74 crore in the third quarter of the previous year. There is no income from the shipping division and property development division compared to Rs 1.78 crore and Rs 14.01 crore respectively in Q3 1999. Adjusted for this but excluding other income, the topline has grown by Rs 106.62 crore.

The operating profit margin on Q3 to Q3 basis was lower by 3.5 percentage points to 21.7 percent.The operating profit has actually improved by Rs 11.53 crore and unless other income has contributed significantly, which is unlikely, the only reason could be sharp cost cutting. The higher interest and depreciation burden resulted in PAT dipping to Rs 4.95 crore compared to Rs 27.18 crore in the second quarter. The interest cover is just 0.7, although compared to the second quarter, interest burden has gone up by a marginal Rs 1.68 crore.

Cement prices in the south have so far shown no signs of improvement and the impact of the private placement of debt will be reflected in the last quarter.The company has retained the entire oversubscription of Rs 156 crore. The Rs 356 crore will be used to re-pay Rs 125 crore debt raised from IDBI for Dalavoi unit and the rate of rest of Rs 75 crore is renegotiated. The PAT figure includes unrealised profit earned by assigning the deferment liability of sales tax and hence is inflated to that extent.

The upgradation of the Chilamakur plant had been completed in December 1999, enhancing the capacity to 1.3 million tonnes per year from 1 mtpa. The cost cutting is something that ICL desperately needed as amongst the majors, it was the highest cost producer. After adjusting for the purely accounting entry profit booked in 1998-99, which inflated PAT by Rs 59.39 crore, the PAT in the current year (which will include lower profit booked on assignment of sales tax liability as the sales tax is calculated on post excise price and cement prices in the last four months in south are lower) will be higher.If ICL decides to book profit on acquisition of Sri Vishnu Cement as it did for Raasi in 1998-99, the figure will be even more impressive.

BPCL

The scrips of petroleum companies have been hammered down for the last couple of months. The stock market has anticipated that following the commencement of Reliance's 27 million tonne mega refinery, the other major refineries in the public sector will be in deep trouble. The Q3 results seem to bear out the correctness of that view.

Though BPCL's net sales have increased in Q3 of the current fiscal by 71 per cent from Rs 5,346 crore to Rs 9,143 crore, net profit has slipped by 19 per cent to Rs 141 crore. The growth has not been translated to the bottomline because of the rapid growth in the cost of raw material which has come mainly from the doubling of crude price during the last one year. During the period, crude prices have soared from $11 per barrel to $26 per barrel. This resulted in total expenditure increasing by 75 per cent from Rs 4,987 crore to Rs 8,750 crore during the same quarter. During the quarter, crude thoughput declined by 21 per cent from 2.35 million metric tonnes to 1.85 million tonnes. The company says that the volume fall was because of shutdown of major units for maintenance purposes.

The decline in production was reflected in the operating margin slipping from 7.77 per cent to 4.62 per cent and net profit margins from 3.24 per cent to 1.54 per cent

Such wafer thin margins spells higher risk in operations in future.The combined nine-month results were comparatively better than the quarterly results. During nine-month period, income increased by 47 per cent to Rs 22,654 crore, operating income by 16.5 per cent to Rs 1,279 crore and net profit by 6.4 per cent to Rs 549 crore. During the same period crude throughtput was slightly lower from 6.63 million tonne to 6.41 million tonne but sales increased by 9.9 per cent from 12.71 million tonne to 13.97 million tonnes. This is because the company also markets crude to other refiners in the public and private sectors.

The impact is likely to be harsher in the coming months when the refineries, including the Reliance one, run full steam ahead. The various product line in the lubricating segment have also been hit on account of higher lube prices and the threat of new entrants also hangs over this segment.

HPCL

The third quarter results of Hindustan Petroleum have been equally dismal, and the company posted a lower operating profit of Rs 403 crore against Rs 434.7 crore in the corresponding quarter of the previous year. The company had made a provision of Rs 26 crore in Q3 including Rs 14 crore for the earlier period ended March 31,1999 for salary arrears towards pay revision.

After providing higher depreciation by Rs 12 crore to Rs 109 crore, the company managed to show the Q3 net profit at flat level at Rs 221 crore against Rs 219.58 crore in the previous year. Operating profit margins also slipped to 4.3 per cent from 6.9 per cent and net profit margins to only 2.38 per cent from 3.5 per cent in the previous year. In fact the net profit would have been still lower by Rs 8.29 crore if it had not made an adjustment of depreciation on LPG cylinders.

Like most other refineries, HPCL also posted jump in net sales by 49 per cent from Rs 6,227 crore to Rs 9, 273 crore but again this was mainly on account of doubling of crude prices over previous year. Nine months results were better improved than quarterly results and the company earned a net profit of Rs 789 crore which was 20 per cent higher than the previous years profit of Rs 655 crore. Doubling of the crude price resulted into turnover growth of 34 per cent from Rs 17,278 crore to Rs 23,173 crore.

Despite restricted volume growth and higher value growth, the company managed to restrict downward movement of net profit margin. The net profit margin in nine months period decreased to 3.4 per cent from 3.8 per cent in the previous year whereas the operating profit margin has fallen from 6.9 per cent to 5.4 per cent. The company has thus achieved better efficiency than the most other refineries.

Emcee (with contributions from Urmik Chhaya and Dhruv Rathi)