Business Daily from THE HINDU group of publications
Wednesday, May 28, 2008
ePaper | Mobile/PDA Version | Audio
Business Daily from THE HINDU group of publications Wednesday, May 28, 2008 ePaper | Mobile/PDA Version | Audio |
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Corporate
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Outlook Weakening rupee may benefit Haldia Petro Import duty on naphtha at 5% may negatively impact bottomline by Rs 200 cr Scheduled shutdown for 75 days also likely to affect profits Pratim Ranjan Bose Kolkata, May 27 In a year when its profitability is under serious pressure for a variety of reasons, the weakening of the rupee against the dollar may come to the aid of Haldia Petrochemicals in booking a substantial exchange gain. According to the industry norm, HPL consumes feedstock and sells its products at a dollar denominated international price, which is converted into Indian rupee at the prevailing exchange rate for accounting purposes. Naturally when the rupee became stronger by well over 300 paise (from as high as 43.05 a dollar on April 2, 2007) during 2007-08, Haldia Petrochemical’s bottomline was hit by Rs 10-13 crore a month in an average net of its exchange gain on purchase of naphtha and other feedstock. Reverse trendHowever, the trend seems to be on reverse gear now. Between April 1, 2008 and May 23, the rupee depreciated by 280 paise from Rs 39.88 a dollar to Rs 42.68. HPL admits that the trend so far benefits the company. “HPL’s sales and procurement are all dollar-related, hence weakening the rupee improves net cash flow,” a company official told Business Line. Though it admits that the present trend of weakening of rupee has a positive effect on HPL’s profitability, the company prefers to wait before drawing any conclusion about the estimated impact on its bottomline. While clarity is yet to emerge on the future trend of the exchange rate, the standalone naphtha-based petroleum product manufacturer is expecting the imposition of 5 per cent import duty on naphtha during the Union Budget to negatively impact the bottomline by a clear Rs 200 crore in 2008-09. This, coupled with 75 days of scheduled shutdown for installing the ongoing capacity expansion project between October and December 2008, was expected to leave substantial impact on the profitability of the company in 2008-09. Margin erosionHPL has witnessed a substantial erosion of margins during the last year due to comparatively higher volatility in feedstock prices vis-À-vis the product prices resulting in a 54-per cent net profit drop in 2007-08 to Rs 262 crore. The lower profits came irrespective of a topline growth of 4.8 per cent to Rs 8,600 crore. More Stories on : Outlook | Forex | Petrochemicals
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