Mangalam Cements is dipping into its reserves by paying dividend out of its free reserves. Despite a huge loss of Rs 11.35 crore for the year ended March 1997, the company's board has recommended a dividend of 10 per cent. On an equity of Rs 14.87 crore, it would result in a cash outflow of Rs 1.48 crore, which may not have much of an impact on the huge accumulated reserves of over Rs 59 crore.

After staging a turnaround in 1995-96, the company has slipped back into the red. Mangalam Cements reported a net profit of Rs 19.5 crore in 1995-96 against a net loss of Rs 16.57 crore in 1994-95. Again, high interest cost and high cost of input led to a sharp fall in margins. Expenditure grew by 22 per cent against a negligible increase of 3 per cent in turnover.

Although the company is not really dependent on other income to boost its bottomline, other income, which shot up by 39 per cent to Rs 2.17 crore, losses under check.

Performance in the second half has been very discouraging and the company reported a net loss of Rs 13.82 crore. Signs of the squeezing bottomline were visible in the first half when the company had reported a 62 per cent drop in net profit to Rs 2.47 crore. A loss of Rs 13.82 crore in the second half resulted in a loss of Rs 11.35 crore for the full year.

Mangalam Cements is not the only one in the industry to be hit by low off take and rising costs. The cement major ACC reported a 50 per cent drop in net profit in the first half. The second half performance is not expected to improve and the earnings are likely to erode further. Cement divisions of conglomerates like Grasim, L&T, Century, Indian Rayon too have failed to sustain the growth levels. Mangalam Cements' scrip too has not been faring well on the bourses. Mangalam's scrip rallied from Rs 19 to Rs 32 in December 1996, but since then has been falling. The stock currently languishes at around Rs 16 close to its all-time low of Rs 15.

Copyright © 1997 Indian Express Newspapers (Bombay) Ltd.