The Hindu Business Line : High fuel prices may tell on Phillips Carbon profit

PHILLIPS Carbon Black Ltd, an RPG group company, has become India's largest carbon black producer. However, for the year ending September 2004, its profitability is likely to be affected due to high fuel prices despite a significant growth in its topline.

The company has installed two production lines at its Baroda plant and increased its carbon black capacity from 25,000 tonnes to 95,000 tonnes per annum. The project cost was Rs 57 crore and it was funded through debt and internal accrual at a ratio of 2:1.

"With this additional capacity we have become India's largest and the world's ninth largest carbon black manufacturer. Our domestic market share is 43 per cent and we will maintain it," a company spokesperson said.

The total carbon black capacity of Phillips Carbon is at 2.7 lakh tonnes per annum. The Durgapur plant has the highest capacity at 1.4 lakh tonnes per annum. The capacity of Kochi plant is 40,000 tonnes per annum but as per a court order it is running only up to 35,000 tonnes per annum.

According to the spokesperson, Phillips Carbon has entered into a five-year contract with Adani Power Trading Corporation to sell a minimum of 6.5 MW power from its Baroda unit, where it recently installed a 12 MW co-generation power plant.

The company is also negotiating with other power trading companies such as Reliance, Tata, Adani and Power Trading Corporation to sell its excess power from its proposed 16 MW plant at the Durgapur .

For the proposed power plant at Durgapur, studies have already been conducted by Dasturco, ILFS Power and Descon. The cost of this power plant will be Rs 60 crore and it will be funded through internal accruals and debt.

Meanwhile, Phillips Carbon has entered into a long-term tie-up with a global tyre major. Exports to this company itself will be around $300 million. The company is also talking with another global tyre producer for a similar agreement.

"As of now, we have planned to sell 1.5 lakh tonnes of our total production in the domestic market and the rest, 1.2 lakh tonnes in the overseas market. In the current fiscal, we will be doubling our exports to around Rs 110 crore from Rs 53 crore in 2002-03," he said.

In 2003-04, Phillips Carbon's turnover is expected to rise to Rs 640 crore from Rs 543 crore in 2002-03. However, profitability is likely to be affected because of "high fuel prices". In 2002-03, the company's net profit was Rs 19 crore.

With the completion of the Durgapur power plant, the company's total revenue from the power sector is likely to be around Rs 30 crore. "Profitability of this business will be extremely high and it will help us to de-risk our operation from the core activities," he said.

The company is contemplating changing its accounting year from October-September to April-March.