The Hindu Business Line : Provisions cause Chemplast Sanmar to report loss in Q4

Mr N. Sankar (left), Chairman, Sanmar Group, and Mr Vijay Sankar, Deputy Chairman, Sanmar Group, at a press conference in Chennai on Friday. - Bijoy Ghosh

Chennai April 13 Chemplast Sanmar Ltd has reported a net loss of Rs 1.38 crore for the fourth quarter of 2006-07. This was because of a Rs 8-crore provision the company made against a disputed tax liability, which the company is confident will be decided at the Tribunal level in its favour.

The company made a pre-tax profit of Rs 8.50 crore for the quarter, almost same as in the corresponding quarter of the previous year.

The income tax authorities have disputed the company's claim that the income earned from the use of a captive power unit is tax-exempt.

There are many Court cases that have been decided in the favour of the assessee, Mr P.S. Jayaraman, Managing Director, Chemplast, told Business Line. Yet, following a conservative approach, the company decided to make a provision for the disputed liability, he said.

Turnover for the quarter remained flat at Rs 149.30 crore compared with Rs 148.20 crore previously.

For the full year 2006-07, Chemplast Sanmar Ltd has reported a lower net profit of Rs 23.19 crore for the year 2006-07, against Rs 36.71 crore for the previous year.

The dip in net profit is mainly because of the non-receipt of compensation payment under the Montreal Protocol arrangement. (The company gets the compensation for phasing out the production of carbon tetrachloride, a greenhouse gas.)

In 2005-06, Chemplast received Rs 18.40 crore as compensation against Rs 1.76 crore last year. Chemplast says that the "disbursal of compensation payment of Rs 12.70 crore was delayed" and would be received in the first quarter of the current year.

Even if the amount is added to the company's net profit of Rs 23.19 crore, the bottomline is flat, reflecting the increase in prices of some raw materials. For example, the prices of methanol, which Chemplast uses to produce chloromethane solvents, rose from $300 a tonne in August to a peak of $510 a tonne in a few months.

"With a view to conserving resources to meet the capital expenditure programmes, the directors do not recommend payment of dividend on the equity shares for 2006-07," the company says in a press release.

Turnover for the year increased 3.6 per cent to Rs 706 crore against Rs 681 crore previously.

Chemplast Sanmar has chalked out an investment programme of Rs 1,000 crore, more than half of which (Rs 520 crore) will be for putting up a 200,000-tonne, greenfield PVC plant at Cuddalore.

The rest of the proposed investments will go into many other projects which include a 48.5-MW coal-fired power plant and capacity expansion of the polysilicon and PVC pipes units.