The Hindu Business Line : Indian Rayon net falls to Rs 24.67 cr

INDIAN Rayon and Industries Ltd on Wednesday reported a reduced net profit of Rs 24.67 crore for the quarter ended September 30, 2004, as against the previous corresponding Rs 53.59 crore.

The company's net income from operations was Rs 465.08 crore (Rs 426.46 crore for the year ago period) and its other income, Rs 4.36 crore (Rs 5.79 crore).

At a press briefing, Mr Adesh Gupta, Senior President & CFO, pointed out that the company's garment business had improved further and the performance of its textiles and insulators segments had been satisfactory.

But the viscose filament yarn (VFY) business continued to face price pressure due to industry oversupply, cheap imports and high input cost. Similarly, Indian Rayon's carbon black business also faced pricing pressure due to the withdrawal of duty differential and high input cost caused by rising crude oil prices.

In the just ended quarter, garments accounted for 28 per cent of the company's revenue, carbon black had 24 per cent, textiles 24 per cent and VFY 19 per cent. In terms of operating profit, VFY accounted for 32 per cent, carbon black 25 per cent, garments 19 per cent and textiles 13 per cent.

Indo Gulf's interest expense for the quarter dipped to Rs 5.4 crore (Rs 6.7 crore). Mr Gupta said, debentures worth Rs 56.7 crore were repaid. But other income was lower due to a reduction of surplus funds and lower dividend given the sale of Indo Gulf shares last year.

The company has signed a long-term settlement with workers. On the other hand, the second quarter saw VRS availed by 408 persons at a total cost of Rs 7.2 crore. "We expect some more rationalisation in the current quarter," Mr Gupta said. The VRS outgo also resulted in a lower tax provision for the period.

If the VRS expense and a Rs 20 crore profit last year on the sale of Indo Gulf shares are kept aside, then the company's net profit before exceptional items was Rs 29.2 crore (Rs 33.6 crore), a more subdued fall compared to net profit's alone.

Over 2005-2007, Indian Rayon is looking at a total capital expenditure of Rs 691.4 crore. With expansion, its VFY capacity will increase from 15,000 tonnes per annum to 16,000 tonnes.

Though VFY pricing remains challenging (Mr Gupta feels some of the other players may go out at current levels), domestic outlook for the garment business is strong. Turning around, Peter England has already crossed a turnover of Rs 50 crore in the first half.