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Tuesday, Jun 08, 2004

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Global oil prices put Phillips Carbon under pressure

Indrani Dutta

Kolkata , June 7

VOLATILITY in the international oil market is putting the margins of Phillips Carbon Black Ltd (PCBL) under considerable pressure.

Company sources said crude prices, earlier expected to be around $30, have been hovering around $40 with increased consumption by the US and China.

"This has pushed up costs substantially," the sources said, adding that it took 1.8 tonnes of feedstock to get a tonne of carbon black and the price of feedstock, a crude oil derivative, accounted for as much as 65 per cent of the production cost. Carbon black is a major raw material for automotive tyres.

All the major carbon black companies in the country have been caught off-guard by the high oil prices, the sources said. Efforts were now on to pass on at least a part of the increased cost to tyre manufacturers.

The sources said that PCBL, which was targeting a Rs 240-crore jump in turnover this year from Rs 560 crore in 2002-03(Oct.-Sept.), does not have too much scope to cut costs. Its interest costs are already low with retired debts and restructuring of the 600-strong manpower does not seem feasible at this juncture.

PCBL, which is now implementing expansion plans, has units in Durgapur , Baroda and Kochi . Alongwith these expansion plans (at Durgapur and Baroda), the RPG-group company is also planning to get into trading of power generated by utilising the process gas. This gas, which is generated during manufacture of carbon black, would otherwise have had to be incinerated or released into the air.

The sources said that this third power sale is now expected to boost the bottomline of the company, which stood at Rs 18.6 crore last year at the post-tax level. PCBL has an October-to-September accounting year.

The sources said that entry into power trading has been designed to insulate PCBL from the cyclical nature of its core business as also the uncertainties regarding its main raw material carbon black feedstock.

PCBL falls under the tyre group business of RPG group, which has the second-largest business share after the power group and is considered one of the thrust areas.

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