INDUSTRY UPDATES on 23th October,2013

the industrial updates, as on 23/10/13.

(1) Coromandel International Q2 net down 32.5 pc at Rs 160 crore

Coromandel International Limited, a maker of fertilisers and pesticides, today said its consolidated net profit for the quarter ended September 30 fell 32.5 per cent to Rs 160 crore.

The net profit for the Murugappa Group firm in the same period last fiscal stood at Rs 237 crore.

The dip in net profit was due to to higher production costs and reduced subsidy income, said Kapil Mehan, Managing Director, Coromandel International Limited ( CILBSE -0.75 %).

However, the total income in September 2013 quarter stood at Rs 3,228 crore as against Rs 2,697 crore in the same period last fiscal.

"Strong and active monsoon has had a positive effect on all the agri-inputs business of the company during the quarter. Though the cost push pressures and the weakening of the rupee have impacted the financials, we are confident that our perseverance and focus of catering to the needs of the farming community through our diversified business will help us in achieving our long term business objectives," Mehan said in a press conference.

The consolidated EBIDTA (Earnings Before Interest, Taxes, Depreciation, and Amortisation) for the quarter has registered a growth of 20 per cent over corresponding previous quarter excluding prior year subsidy income, he added.

The city-based company is a leading manufacturer of fertilisers, crop protection products and speciality nutrient products.

(2) Mills refuse to sell sugar cheap

Sugar prices on the Vashi wholesale market declined by Rs 15-25 a quintal for M-grade and Rs 5-13 for S-grade on higher selling pressure at upper level. Naka and mill tender rates were unchanged as mill refused to sell at a lower price, resulting in the volume dropping.

Activities were restricted at ample stocks are available in the market. Prices on domestic futures market dropped on profit booking. Jagdish Rawal of B. Bhogilal & Co said that in Vashi arrivals and local dispatches were routine. Demand for the fine variety continued to be higher ahead of Diwali. The market carries ample stocks and producers are continuously selling in local markets in absence of neighbouring
States’ buying. Arrivals in Vashi market were 61-62 truckloads (100 bags each), while local dispatches were also 61-62 truckloads. On Monday, 19-20 mills offered tenders and sold about 39,000-40,000 bags at Rs 2,700-2,840 (Rs 2,700-2,840) for S-grade and Rs 2,880-3,000 (Rs 2,880-3,000) for M-grade.

Bombay Sugar Merchants Association's spot rates were: S-grade Rs 2,900-3,042 (Rs 2,892-3,055) and M-grade Rs 3,011-3,256 (Rs 3,026-3,282). Naka delivery rates were: S-grade Rs 2,830-2,920 (Rs 2,830-2,920) and M-grade Rs 2,950-3,120 (Rs 2,950-3,120). Uttar Pradesh rates were: Lakhimpur Rs 3,315 and Muzzafarnagar Rs 3,225.

(3) Wheat may rule firm on festival demand

Wheat futures remained supportive while dara wheat ruled firm in the physical market on domestic demand on Tuesday.

Satish Kumar, a commodity expert, told Business Line that since demand matched supply, prices were unchanged.

In the absence of any major market moving factors, dara and flour prices have been ruling steady since last weekend and may continue to rule around current levels for the next couple of days, too, he said.

Dara wheat and flour prices improved by Rs 40 and Rs 25 a quintal, respectively, over the last one week and festival demand is supporting the market currently, he added.

In the physical market, dara wheat sold at Rs 1,570-75 a quintal. Around 1,050 bags of wheat arrived and stocks were directly offloaded at the mills.

Mill delivery was at Rs 1,570, while delivery at the chakki was at Rs 1,575.

Wheat futures have been ruling in a tight range over the last few days and may continue to witness a range-bound movement in the coming days, said market experts.

Wheat for November contracts traded at 1,613 with an open interest of 5,050 lots. December contracts went up by Re 1 and traded at Rs 1,639.

In the spot market, the grain improved by Rs 10 and traded at Rs 1,550.

Flour Prices

Following good domestic demand, flour remained unchanged and quoted at Rs 1,800. Similarly, chokar was unchanged at Rs 1,270-90 a quintal.

(4) Sugar shares surge as supplies from Brazil gets disrupted

Shares of sugar companies rallied on the bourses today as global sugar futures witnessed a significant rally amid ongoing concerns over the disruption of supplies from Brazil, the world’s largest producer and exporter of the sweetener.

While Shree Renuka Sugars ended 10.26 per cent higher at Rs 21.50, Bajaj Hindusthan was up 3.74 per cent to Rs 14.72 on the BSE.

Mawana Sugars jumped 7.81 per cent, Oudh Sugar Mills rallied 5.71 per cent.

Dhampur Sugar Mills rose by 3.27 per cent, Sakthi Sugars by 9.99 per cent and Dwarikesh Sugar Industries by 10.62 per cent.

Global sugar futures prices are trading near the strongest level since October 2012 as ongoing concerns over a disruption to supplies from Brazil continued to drive prices higher.

According to market experts, the rally in the sugar counter was mainly due to the fact that as sugar shipments from Brazil have been hampered, domestic sugar companies could export more sugar.

The rally in the sugar counter assumes significance as the broader market settled for the day in the negative territory as the 30—share benchmark index Sensex ended the day with losses of 28.92 points, down 0.14 per cent.

(5) UK to build first N-power plant in two decades

The British government, in cooperation with French energy firm EDF, and two Chinese companies, will build the country’s first nuclear plant in over two decades.

The plant, to be set up in south-west England, will be one of the first in Western Europe since the disaster at the Fukushima nuclear plant in Japan.

EDF and its partners, Chinese energy firms CGN and CNNC, have struck a deal to invest £16 billion in the Hinkley Point C (HPC) power plant. The plant is expected to meet around 7 per cent of the country’s energy needs in the long term, the British government said in a statement on Monday.

“This… marks the next generation of nuclear power in Britain, which has an important part to play in contributing to our future energy needs and our longer term security of supply,” said Prime Minister David Cameron.

The news follows Chancellor of the Exchequer George Osborne’s high-profile visit to China last week, during which it was agreed that Chinese nuclear firms would be able to invest in British nuclear plants.

This step is in contrast to measures in Germany, which is set to decommission all its nuclear power plants by 2022, in the face of huge public pressure following Fukushima.

Globally, nuclear contribution to electricity has fallen from 17 per cent in the 1990s to 10 per cent, according to Chatham House, an international think tank.

Chatham House senior research fellow Antony Froggatt pointed to the huge gap between EDF’s estimate of the cost of developing the project back in 2006 and the strike price agreed under the deal: £23.5/MWh against £92.5/MWh.

“This… puts the cost of nuclear electricity at about double the current market rate, and higher than that produced by gas and coal-fired power stations, and also makes it more costly than many renewable energy options,” wrote Froggatt, in a note published on Monday.

The government subsidy involved will mean the deal will have to get the go ahead from the European Commission.

Environmental groups expressed concern that the costly project, and potential cost overruns, could detract from investment into renewables.

(6) Urea sales rise as other fertilisers cost more

Farmers continue to show their preference for cheaper urea, a trend reflected in the sales of the fertilisers.

Urea sales were up 11 per cent during the April-September this fiscal at 15.1 million tonnes against 13.6 mt in the corresponding period a year ago.

During the same period, sales of non-urea complexes, including the di-ammonium phosphate (DAP), dropped 17 per cent, according to industry estimates.

DAP sales were down by about a fifth at 3.2 mt during April-September against 4 mt last year.

Similarly, the sale of potash was marginally down at 1.07 mt against 1.1 mt in corresponding last year, while the offtake of NP/NPK nutrients declined 18.54 per cent to 3.03 mt against 3.73 mt last year.

The rising offtake of urea has left industry players worried.

The increased urea usage was not a healthy trend in the long run, as it would adversely hit soil, thereby, affecting farm productivity.

“The sales of non-urea complexes were down by about 30 per cent, while urea sales have increased by 12 per cent,” said U.S. Awasthi, Managing Director of Indian Farmers Fertiliser Co-operative Ltd, the largest manufacturer and marketer of fertiliser in the country.

Excess rains this year had boosted kharif acreage by about five per cent with the total cultivated area estimated at 1,051 lakh hectares against last year’s 1,006 lakh hectares.

“Urea continues to be sold at ridiculously low price and that’s attracting the farmers,” Awasthi said.

The continued increase in application of urea would lead to imbalance in fertigation affecting soil health, he warned.

Urea, which is highly subsidised by the Government, is currently priced at Rs 5,360 a tonne, while DAP and muriate of potash (MoP) are priced at Rs 22,500 and Rs 16,000 a tonne, respectively.

The Government had de-controlled the prices of non-urea fertilisers, such as DAP and NPK, by introducing nutrient-based subsidy (NBS) in March 2010.

Since then, the prices of DAP have almost more than doubled from a level of Rs 9,350.

In the past four years, urea sales have gone up from 25 mt in 2009-10 to 30.15 mt in 2012-13.

Poor demand amidst high stocks, carried forward from the last year, has also led to imports of fertiliser dropping this year.

“Our imports so far this year are about one million tonnes against 2 mt in the corresponding period a year ago,” said P.S. Gahlaut, Managing Director of Indian Potash Ltd, a large importer, adding that the growing imbalance in fertiliser was a cause for worry.

Gehlaut expects the demand for rabi season to be better than last year.

The fertiliser industry believes that despite lower sales this fiscal, the actual consumption could have been much higher, as huge stocks accumulated within the distribution chain seem to have been utilised. In the beginning of this fiscal, DAP stocks with the trade were estimated at 5.5 mt, while urea stocks were pegged at one million tonnes.

Kapil Mehan, Managing Director of Coromandel International Ltd, estimates actual consumption of phosphatic and potassic complexes this kharif to be higher at nine million tonnes against 7.5-8 mt in the corresponding last year. “The stock pipeline that got built up with the distribution chain in recent years is getting liquidated,” Mehan added.

Coromandel reported a 35 per cent increase in sales of manufactured volumes of phosphatic fertiliser during the September quarter this year, while its traded volumes were down 31 per cent for the period.

(7) Operations at Old Mangalore Port come to standstill

Operations at the Old Mangalore Port were affected on Tuesday as the members of the Old Mangalore Port Users’ Association went on a strike. They were demanding the appointment of the surveyor of vessel at the port.

Barring the sailing out of a passenger vessel carrying citizens of Lakshadweep to the island, no other vessel operation took place at the Old Mangalore Port on Tuesday.

The members of the association sat in a protest in front of the Port Officer’s office at Old Mangalore Port. Speaking on the occasion, Charandas Karkera, President of the association, said that since the last two months there is no officer at the port to carry out the annual inspection for the renewal of the validity certificate of vessels.

The Port Officer in-charge has not been given the responsibility to carry out vessel inspection. This has affected the operations at the Old Mangalore Port, he said. (Old Mangalore Port, an important minor port that comes under the Karnataka Government, handles cargoes meant for Lakshadweep islands.)

Harish Kava, member of the association and vessel owner, said that the absence of an official to inspect the vessel has affected many vessel owners. More than 20 vessels have been forced to anchor at the Old Mangalore Port due to this. The vessel owners have been forced to pay wharfage of around Rs 300 a day for a vessel for the past two months.

Some of the members of the association, who spoke on the occasion, wondered why they should pay the wharfage for the mistakes committed by the Government. The operation at the Old Mangalore Port takes place between September and May. Any impediment in the operations during the period would affect their livelihood, they said.

Meanwhile, J.R. Lobo, Mangalore (South) MLA, met the protesters at the Old Mangalore Port and asked them to withdraw their strike for two days.

When he tried to contact the Karnataka Port Minister, Baburao Chinchanasur, on mobile phone to discuss the issue, the Minister was not was not available for contact.

The MLA, who spoke to an official in the Port Department, informed the meeting that steps would be taken to carry out the survey of the vessels and a person would be deputed for this purpose.

On the demand of the port users that a surveyor of vessel should be posted in Old Mangalore Port, Lobo said the matter would be discussed in due course of time.

Some members of the association said that the lone passenger vessel to Lakshadweep, m.v. Amindivi, should not be allowed to sail out. Pacifying the members, Karkera said that advance information about the strike was not given to the crew of the passenger vessel. He said that the vessel carrying Lakshadweep residents would be allowed to sail out to Lakshadweep.

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