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In revival mode

The future is optimistic for Goa Carbon Ltd with demand reviving and smart turnaround numbers in April-June quarter of 2014-15, reports SHOMA PATNAIK
On the back of robust results in first quarter of the year and with demand reviving, things look cheery for Goa Carbon Ltd in 2014-15. Exchange rate volatility and recession adversely affected the company finances in 2013-14. However, the scenario is a lot improved in the current year with all factors in place for a spring back performance.
There is a “feel good” sensation to the coming months as local demand is going up, says Jagmohan Chhabra, executive director. The company’s product, he says, is sold to basic industries of aluminum and steel many of which are commissioning new smelters. Sales to them are expected to increase as consumption of metals pick up due to large infrastructure projects planned by the new government. Thus, hopes are for sustained good run even as efforts are on to maximize profitability through higher productivity and operational efficiency.
Healthy financials in first quarter 2014-15 were due to combination of reasons, says Chhabra. During the three month period, the net profit stood at Rs 3.5 crore compared to net loss of Rs 7.5 lakh in the corresponding period of the previous year. It was due to higher volumes achieved at a time when raw material price was relatively cheap while another reason was a stable rupee-dollar exchange rate.
Then, there were deeper measures too like better cash flow management and cost reductions. It helped to bring down the interest cost sharply to Rs 0.97 crore in April-June quarter of 2014-15 compared to Rs 1.33 crore in previous quarter. In the remaining months of 2014-15 the strategy for bottom-line growth is to aim for higher capacity utilization in all three plants and carry on with managing cash flow efficiently.
Established in 1967 Goa Carbon is the second largest manufacturer of calcined petroleum coke (CPC) in India. CPC is used by aluminium, steel and titanium dioxide industries, although the company’s primary customers are to the aluminum sector which comprises for nearly 85 per cent of sales. Key aluminum customers are Hindalco, Vendanta companies, BALCO, among others. While in steel sales are to sponge iron units clustered around Chattisgarh.
The company’s CPC capacity of 2,40,000 tonnes per annum is spread over three plants in Goa (75,000 TPA) Bilaspur (40,000 TPA) and Paradeep (1,25,000 TPA). Of this, the Paradeep plant is the latest, the largest and also the most profitable being strategically located in terms of proximity to customers and port. Capacity utilization in the Paradeep plant is about 75 per cent and Bilaspur approximately 60 per cent.
The Goa plant, it is pointed out, ranks low in profitability as it faces raw material shortage due to imports not allowed at Mormugao Port. It suffers from low production and hence has underutilized capacity. It is also far away from the market and faces a high transportation cost. With most aluminum expansion taking place in east-coast India of Orissa, it figures that the Paradeep plant will remain crucial to performance in the future and therefore be the focus of facility enhancement and improvements.
Meanwhile, a check through key parameters reveals that the company imports nearly all its raw material requirement from international market. This exposes it to foreign exchange risks during periods of sharp fluctuations in forex rates. On the plus side, Goa Carbon is a low debt company and does not have large exposure to long term loans in its debt portfolio. This gives scope to contain interest expenditure through effective managing of working capital. The company’s sales are also to export market although with international price of CPC currently depressed the domestic market is where sales are concentrated.
A Dempo group company, Goa Carbon is a BSE listed company with shares quoted at Rs 84.50. Goa Carbon (Cangzhou) China is a subsidiary of the company with an annual capacity of 3 lakh tonnes. Through the China subsidiary, the company intends to meet the demand of growing Asian and middle-east markets.
Goa Carbon’s prospects are directly linked to off-take of basic metals which in turn depends on government investment in infrastructure projects such as construction of ports, logistics, etc.

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