Yield pressure on domestic as well as international operations and an increase in jet fuel and other input costs were the primary reasons for losses, the company said. ATF prices are rising and company had levied a fuel surcharge of Rs 300 on airfares during this quarter to tackle this. An additional Rs 200 has been levied as fuel surcharge starting July 7.
Personnel costs were higher on account of the increase in average staff numbers due to expansion of international operations, induction of pilots and engineers, higher training costs and the normal annual wage increase for employees.
International operations of the company recorded a loss of Rs 71.3 crore. This was due to the combined impact of a comparatively lean season and also increase in capacity by incumbents. According to industry analysts, it will take at least two years for Jet Airways to break-even on its international operations.
During the quarter, the company also decided to exit from the overvalued Air Sahara deal. However, this has not helped the company's stock, which fell by an 25% after the exit from the deal on account of high ATF prices. ATF is at present quoting at Rs 46,565 per kilolitre.
The VSF realisations were higher by 8% and cement realisations up by 36%, primarily due to price hikes in the past few months. The company has lined up a capex plan of Rs 617 crore for its VSF business.
Capacity expansion and modernisation at its VSF plants at an outlay of Rs 617 crore will ramp up the capacity to 306,600 tonne per annum by FY08, said DD Rathi, whole-time director and CFO, Grasim.
The company has planned Rs 3,641 crore of capex for its cement business. Out of this, Rs 2,475 crore will be for augmenting the capacity by 8 MTPA and setting up of thermal power plants. It entails the setting up of a 4-mtpa greenfield cement plant at Kotputli, and capacity expansion at the Shambhupura plant, both in Rajasthan. It would enable the company to cater to the increasing demand in the northern region.
We have already tied up finances for 25% of the capex plans. The funding will be met through a mix of internal accruals and borrowing, said Rathi. He also said that the sponge iron business is not doing well primarily due to the non-availability of gas, hike in input costs and lower realisations.