Sales growth of Glass & glassware industry's down in June 2014 quarter

Glass & glassware industry’s sales growth decelerates in June 2014 quarter

Industry remains in losses at net level

The net sales of glass & glassware industry slowed down to 6.2 per cent in the June 2014 quarter after growing by 9.3 per cent in the preceding quarter. This was mainly because of two of the leading companies, namely, Asahi India Glass (AIGL) and HSIL. These two companies account for almost half of the industry’s total sales.

AIGL stopped the production of float glass at its Taloja Plant owing to expiry of the useful life of furnace. As a result, the company’s revenues from float glass segment declined by eight per cent in the June 2014 quarter. The segment contributed over 40 per cent the company’s total sales. Although, revenues from the automotive glass segment grew by a healthy 12 per cent, the growth in company’s overall sales was restricted to 4.1 per cent The company had reported a 10 per cent growth in sales in the preceding quarter.

The growth in sales of HSIL decelerated to 13.5 per cent during the quarter under review from 24.3 per cent in the previous quarter. The company operates mainly in two business segments, namely, building products and container glass. Sales of the container glass segment grew by 11.9 per cent and contributed 53 per cent to the company’s overall sales. The company’s building products segment reported a 15.3 per cent increase in sales during the quarter.

Among the other leading companies, Piramal Glass (PGL) delivered a healthy sales growth of 13.4 per cent. On the other hand, the net sales of Hindusthan National Glass & Industries (HNGIL) stagnated during the quarter.

Although the industry’s sales grew, total income remained almost flat. This was due to a sharp 86.9 per cent decline in the other income. Other income as a proportion of total income contracted to 0.8 per cent as compared to 6.1 per cent in the year-ago quarter. HNGIL was largely responsible for this. In the June 2013 quarter, the company had earned a profit amounting to Rs.759.8 million on account of sale of equity shares. In absence of this, the company’s other income plunged 98.9 per cent during the quarter under review.

The industry’s raw material expenses surged by 13.4 per cent during the June 2014 quarter. This was mainly due to an increase in the prices of soda ash, a key input required to manufacture glass. Besides, the industry imports more than a third of its raw material requirements. A sharp depreciation in the INR as compared to the USD further added to the spike in the industry’s raw material expenses. Consequently, raw material expenses in proportion to sales increased to 32.9 per cent from 30.8 per cent in the year-ago quarter.

Nevertheless, a fall in power & fuel and other expenses provided relief to the industry. These two expenses (which together account for over 40 per cent of net sales) declined by 9.8 per cent and 5.5 per cent, respectively, during the quarter. Consequently, operating expenses corresponding to goods sold rose by a modest three per cent, slower than the growth in sales. Therefore, operating profit grew by a robust 32 per cent. PBDIT margin expanded by 270 basis points to 13.7 per cent over a year ago.

Among the non-operating expenses, interest expenses declined by 3.6 per cent during the June 2014 quarter due to reduced borrowings. As of 31 March 2014, the industry’s borrowings stood at Rs.52.5 billion, 5.5 per cent lower as compared to that at the end of March 2013. Contrarily, depreciation charges rose by 6.2 per cent and tax provision quadrupled during the quarter. As a result, non-operating expenses rose by 4.3 per cent. It exceeded the operating profit earned by the industry thereby pushing it into losses. In addition, the sharp fall in the industry’s other income further aggravated the losses. Resultantly, the industry incurred losses amounting to 1.9 per cent of income. It had reported profit equivalent to 0.8 per cent of income in the year-ago quarter.