Floatglass India (FGI) managed to increase its selling price by 17.6 per cent during the last one year to Rs 83.5 per square metre of glass; partly effected through a 8 per cent cutback in production. It managed a small operating profit of Rs 9 crore against an operating loss of Rs 11 crore last year. Last year the company was losing Rs 11 per square metre of float-glass produced as it fell way behind its cost of sales. Production costs have inched up marginally but the rise in selling prices was higher resulting in operating profits against losses last year. This is still not a very positive situation, for the bulk of the profit before depreciation and interest has been contributed to by other income.

As such selling float glass will require a lot of investment in developing the market. The cost as compared to conventional glass is seven to eight times higher though the benefits are also much more. The retail market for float-glass has barely been tapped but a lot ofefforts are being made in the institutional segment of the glass market (architects, builders, large construction projects etc) and the automobile manufacturers.

But FGIs operations are still heavily leveraged and a cash inflow is quickly consumed. Though interest cost has reduced from Rs 48 crore to Rs 36 crore it is still a major cause for losses. The level of debt has not changed by much but the composition of debt has changed from being rupee to dollar denominated. While this has served to bring down interest costs it will increase the level of losses on account of currency fluctuations. Under AS 11 forex losses except those on account of fixed assets are to be debited to the profit and loss account. Losses on account of currency fluctuation amounted to Rs 8.5 crore last year and made up for the savings of Rs 10 crore that the company enjoyed on account of lower interest costs.

The stock has naturally lost the charm that it once had. The product appealed to investors as having a lot of potential andthe pedigree of the promoters had also helped in kindling sentiment (the Tata group and Asahi Float Glass, Japan). But with accumulating losses over the last three years reaching Rs 191 crore (wiping out 83 per cent of the networth), the realisation has dawned that despite the obvious strengths of the product and the brand appeal of Asahi Float, the business at present is not remunerative. The stock now adequately reflects this sentiment and trades at one tenth its peak price at Rs 8, an all time low.

The anti-dumping duty whenever imposed on imported float-glass will help in improving realisations. But in order to stop the losses the company will need a combination of both higher realisations and a higher capacity utilisation (currently 59 per cent against a minimum required capacity utilisation of 80 per cent); both of which are unlikely to increase in a dramatic manner in the current year. FGI at present has a marketshare of 22 per cent of the float-glass market, in order to utilise its entire capacityof 29.2 million sq mtrs it will have to push its market share to 38 per cent. Other than FGI and a couple of other producers the bulk of the supply in the float-glass market comprises of cheaper imports mainly from Indonesia; hence the necessity of an anti-dumping duty to shore up margins as well as capacity utilisation.