The Hindu Business Line : Rockwool to adopt new pricing strategy

HAVING suffered losses for not passing on the escalation in input costs onto the customers during last year, Rockwool (India) Ltd (RIL), the city-based industrial insulations producer acquired by the Mauritius-based Alghanim Industries, has decided to follow a new price strategy of being selective in accepting orders from the customers with lower realisation.

Though the ailing company could achieve improvements in the manufacturing front through process upgradation, reducing cycle time and overhauling major items of machinery, it could not succeed in achieving corresponding results in profitability.

For the year ended December 2003, the company improved its capacity utilisation levels to 93 per cent from 89 per cent in the previous year and increased its turnover by 10 per cent at Rs 16.85 crore (Rs 15.32 crore).

However, it had to suffer a net loss of Rs 5.03 crore compared to a loss of Rs 2.14 crore in the previous year, taking the accumulated losses to Rs 24.4 crore (Rs 19.37 crore).

Stating that the company improved its sales performance despite unfavourable market conditions, a senior official of Rockwool (India) Ltd said the company experienced a steep escalation in cost of inputs such as coke and HSD oil.

"The company could not pass on the increase in costs to its customers due to market forces and in view of the need to operate the plant at optimum capacity," he told Business Line.

However, the company has now taken up several measures to pass on cost escalation and has also decided to follow a price strategy of declining orders from customers at lower realisation.

"This strategy is expected to improve the financial results during the current year. As a result of absorbing the increase in input prices, there was an adverse impact on the profitability of the company during last year," he said.

According to him, the company has also started exploring new applications for its products by creating awareness in the market. The new applications include building industry, acoustics and friction materials. "Test marketing is undertaken for these products and the company expects to produce the new products on a commercial scale based on the market acceptance," the official said.