Soaring crude prices shatter returns for sheet glass makers

With the price of furnace oil, used by sheet glass makers to fire kilns, rising in line with that of crude oil, most firms have reported falling profits or losses in the quarter up to March 2008.

The price of fuel is telling heavily on the returns of India’s sheet glass makers, among the worst hit in the manufacturing sector since energy comprises 30% of their manufacturing costs. With crude oil prices at record highs, the news is only likely to get worse.

The country’s sheet glass industry—which, analysts say, earns about Rs2,200 crore a year—uses mostly furnace oil to fire kilns that melt raw materials such as silica and borax to produce glass.

Five listed glass making companies, whose data is available with Bloomberg, have all reported either falling profits or losses in the quarter up to March compared with the same period last year.

For instance, Asahi India Glass Ltd, the largest listed glass making company, posted a loss of Rs12.28 crore on sales of Rs264.20 crore for the quarter that ended on 31 March. Its profit for the fiscal year fell 80% to Rs84.40 crore.

Asahi’s rival Saint-Gobain Sekurit India Ltd posted losses for eight straight quarters, before registering a profit of Rs46 lakh in the quarter up to December, the last time the company filed its results.