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Our Corporate Bureau
Mumbai, Oct 26: Hind Lever Chemicals Ltd (HLCL) has posted a lower net profit of Rs 1.53 crore for the quarter ended September 30, 1998, against Rs 9.08 crore in the corresponding period last year, as the company has, for reasons of prudent accounting, not built into the results any increase in fertiliser subsidy.
Net profit for the first nine months of the current calendar year was lower at Rs 13.22 crore as against Rs 18.25 crore in the same period last year even as net sales rose 23.3 per cent to Rs 453.45 crore from Rs 367.57 crore during the period.
The turnover in the quarter ended September 30, 1998, rose 13 per cent to Rs 221.05 crore, compared with Rs 195.49 crore in the corresponding period last year.
According to the company, there has been a steep increase in the manufacturing and import costs of fertilisers due to rupee depreciation and an increase in input and distribution costs.
While the government has agreed to consider an additional subsidy to neutralise such costs (with effect fromApril 4, 1998), the announcement of revised subsidies is still awaited.
"As a matter of prudence no increase in subsidy has been built into the results. Consequently, the profits of the company are significantly lower than the previous year. Subject to fair increase in subsidy, the company is confident of delivering a healthy growth in the operational profit," the company has stated.
It said that an increase in sales was achieved largely by extending fertiliser sales to new markets and dealing in imports of diammonium phosphates (DAP). Production of DAP and sodium tripolyphosphate (STPP) was at a record high of 1.94 lakh tonnes and 31,058 tonnes, respectively.
Despite the 27 per cent increase in turnover of the fertiliser business, financial performance of the fertiliser business was adversely impacted due to the government not announcing the revised subsidy for kharif 1998.
As a result of operating loss in the fertiliser business due to the non-availability of the revised subsidy, cumulative profitbefore tax for the first three quarters has declined to Rs 15.6 crore from Rs 28 crore in the corresponding period last year.
The company has expressed disappointment at the reversal of the policy of "free float" of price for the decontrolled fertilisers, which was announced by the government in August this year. The company hoped that the reversal is a temporary measure and a "free float" will be introduced at the earliest opportunity.
Insight
Policy delay hits profitability: Hind Lever Chemicals' results show what delays in announcement of policy by the government can do to the profitability of a company. The company, which managed a profit of Rs 9.08 crore in the third quarter of 1997-98, has been barely able to post a profit of Rs 1.53 crore, and that too because of an other income component of Rs 2.27 crore.
Though the company has managed higher sales on account of extension of its marketing zone and higher trading activity, higher input costs have resulted in an operating loss forthe company. What is worse for the shareholders is that the company has doubled its equity base by announcing a bonus issue, which means it will have trouble servicing its equity.
HLCL's results will be a precedent for the results of other DAP manufacturing and trading companies like Dharamsi Morarji Chemicals.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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