The Hindu Business Line : Indo Gulf Fertilisers' Q2 profit dips to Rs 16.19 cr

INDO Gulf Fertilisers Ltd has reported a reduced net profit of Rs 16.19 crore for the quarter ended September 30, as against Rs 27.65 crore registered during the same quarter last year.

Net sales were up at Rs 238.36 crore (Rs 216.64 crore for the year-ago period) but other income dipped to Rs 3.22 crore (Rs 5.51 crore).

In its statement, the company attributed the lower net profit to "a further reduction of Rs 120 per tonne with the implementation of stage 2 of the urea pricing policy, significantly higher raw material / packaging cost due to higher oil prices and lower other income due to falling interest rates."

During the quarter, Indo Gulf was impacted by limited availability of natural gas and the consequent use of costlier naphtha.

At a press briefing, Mr Rakesh Jain, Managing Director, said the Government policy had played a role in the company's reduced profitability. In the last seven years there has been no real change in the retail price of fertiliser while urea inputs costs have risen steeply. On the other hand, the retail price of fertiliser has declined in dollar terms or gained just marginally in rupee terms.

The Government's policy failed to respect manufacturers' operating efficiency, he said. A case in point being the league of pre-1992 gas-based plants, which account for 25 per cent of production (some at good levels of efficiency) and get only 4.4 per cent of subsidy.

It also clubbed together landlocked and landfall fertiliser units. This prevents a level playing field because landlocked units have to bear higher transportation cost.

The Government is likely to re-examine its policy. Notwithstanding the negative impact of policy on manufacturing economics, Indo Gulf noted in its business outlook that the government estimates a shortfall of three lakh tonne of urea during the rabi 2004-05 season. Mr Jain said the Government wanted the domestic industry to meet the shortfall as imports were proving to be expensive.

Indo Gulf hopes to get official approval for de-bottlenecking its urea manufacturing facility from 2,620 tonnes per day to 3,360 tonnes per day, by November. The project, costing Rs 150 crore and to be funded largely from internal accruals, will be completed by March 2006.

"That will help us get back to the profitability level of 2002-03, if not better," Mr Jain said.

For the half year, the company posted a net profit of Rs 24.17 crore (Rs 39.90 crore) on net sales of Rs 333.03 crore (Rs 256.96 crore).