Raw material cost during the quarter has declined by 44 per cent to Rs 23.4 crore which is in sharp contrast to a 21.3 per cent increase in the raw material cost to Rs 104.5 crore during nine months to December 2002. The company has imported erythromycin from China and Russia and that helped it to keep a better control on raw material cost. Other expenses during the quarter rose sharply by 37 per cent to Rs 55.6 crore and that wiped out gains from cheaper raw materials. As a result operating profit improved barely by one per cent to Rs 26.3 crore. Net profit grew 32 per cent to Rs 10.8 crore.
Alembic is likely to benefit from National Pharma-ceuticals Pricing Authoritys (NPPA) 2.8 - 5.0 per cent hike in the prices of pennicilin G formulations in last week of December 2002. The price increase will improve its bottomline and margins. With annual manufacturing capacity of more than 1,000 MMU of penicillin, Alembic is one of the largest players in this segment in the private sector. During 2001-02, it manufactured bulk products of penicillin worth Rs 100 crore. Penicillin accounts for more than 17 per cent of its total turnover.
Alembic notched up a 7.8 per cent growth in sales income at Rs 383 crore during nine months to December 2002. Volume growth in penicillin, third generation type cephalosporins and macrolides aided the sales. It slashed prices of many key products like "Roxid" substantially. The move resulted in a sharp rise in the companys share of antibiotic market. Two other brands "Althrocin" and "Wikoryl" have also made substantial volume gains in the market. Operating profit for nine month was up 16.6 per cent to Rs 72 crore and net profit up 68 per cent to Rs 26 crore.
Maharashtra Seamless Limited (MSL), the leading manufacturer of seamless and ERW pipes, engaged in wind power generation, has performed better during the quarter to December 2002. On a net sales of Rs 120.6 crore, up 36.3 per cent, the company notched up a 51.6 per cent jump in net profit to Rs 18 crore. Its power generation business enabled it to save on power cost. Apart from income tax depreciation benefit and sales tax incentive, other income has aided bottomline growth.
Operating expenses grew faster than did net sales thanks to higher raw material cost, staff cost and other expenses. High steel prices pushed raw material costs up by 20 per cent to Rs 59.1 crore. The share of raw material costs (net of stock adjustment) in net sales went up to 52 per cent (43 per cent). An inventory build-up in anticipation of improvement in demand also led to a rise in raw material cost. Staff cost increased by 27.8 per cent at Rs 1.8 crore, while there was a five-fold increase in other expenses to Rs 4.9 crore. Apparently, operating profit grew just 3.7 per cent at Rs 18.9 crore and OPM was down to 15.7 per cent (20.7 per cent).
Lately, MSL has been showing consistent improvement in the performance because of its strategy of consolidation of core business, seamless and ERW pipes. It has expansion plans that include doubling of annual production capacity of seamless pipes and ERW pipes from one lakh ton to two lakh ton each. The entire expansion is to be funded through internal accruals. This is expected to bring down the cost of production and improve the quality.
MSL also has plans to install coating lines to increase and extend its market share in the oil and gas sector.
The government has given top priority to oil and gas sector. Efforts are on to develop oil fields to extract oil and gas. Private sector investment is invited in this sector under new exploration and licencing policy (NELP).
This ensures great potential of growth in the near future.
Dhruv Rathi and Laxmikant Khanvilkar