Fertiliser manufacturer Zuari Industries posted a 14 per cent decline in the net profit at Rs 31.38 crore for the quarter ended December 31, 2011. The company reported a net profit of Rs 36.57 crore for the corresponding year-ago period.
Net sales of the company, however, jumped 22 per cent to Rs 1,856.19 crore in the third quarter of the current fiscal from Rs 1,524.06 crore in the same quarter of the previous fiscal.
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Suresh Krishnan, Managing Director of Zuari Industries told NDTV Profit that a mix of production and manufacturing has led to a decline in profits in the October-December quarter. “Our EBITDA margins declined due to rupee depreciation, however, our total sales for the cumulative period stood at 15,00,000 tonne,” he added.
Below is the complete interview. Also watch the accompanying video.
Q: What have been the key reasons for the decline in profitability?
A: In the third quarter this year even though we have achieved sales of 5 lakh tonne, the mix the own production and manufacturing trade has not worked in our favor because of the closure plan we had in the month of October. Secondly, both in terms of interest cost, cost of foreign exchange forward covers are far higher than what it was earlier; otherwise we have done well in terms of volume and manufacturing. However, some other face, which is beyond our control, has resulted in a decline in profitability.
Q: Your other income is substantially high during the quarter, any specific reasons for it?
A: No. Primarily, given the fact that we have higher turnovers and we have been having surplus money in and out, the investment flows, which have been coming in, have really reflected out here.
Q: Your EBIDTA margins have halved as compared to the same period last year; any reasons for it?
A: Our EBIDTA margin declined in account of a rise in foreign exchange that we faced during the month of December 2011. I’m sure that the forward cover rates, which are prevalent in the market in the month of December, resulted in the higher expenditure for us. We believe that this will certainly get corrected as we go forward.
Q: Is it due to the fact that you have sold some cargoes at a loss due to rupee volatility?
A: We did not sell any cargoes at loss. It is true that margins were under pressure a bit given the fact that the rupee touched the level of 53 per dollar during the month. We were buying both raw material and finished goods in the month of December and that resulted in little bit of higher input cost for this.
Q: What have been the manufactured volumes during the quarter? Has raw material availability hit your volumes?
A: Our total sales for the cumulative period stand at 15, 00,000 tonne and our total manufacturing volume out of this 6, 67,000 tonne, is about 200 tonne.
Q: There were some problems for you on the raw material availability front especially phosphoric acid. Have they been solved?
A: As far as phosphoric acid availability is concern, in the last quarter we did not have any issues. We were in a comfortable situation and we have inventories, which is a carry forward even to this quarter. Currently, we are negotiating phosphoric acid price for loading, which is going to happen for the fourth quarter and we have not yet finalised the transaction.
Q: Your phosphoric acid contracts for the fourth quarter have not been finalized yet. What could be the price? Are people asking for lower prices?
A: During the third quarter, the price of our pieces was $1080 per tonne and the expectation for Q4 was $960. The contracts are getting finalised at that level and we certainly hope to get Cargoes at that price.
Q: Any updates on urea decontrol from the government?
A: As an industry, we are waiting for the modified version of MPS 3 to be announced, which will clearly define the levels of profitability for the financial year 12-13 as we go forward. As far as the decontrol is concerned, it will be positive for the industry but we really don’t have any news from the government on the same as of now.
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