PHILLIPS CARBON BLACK

A part of the RP Goenka Group, it one the largest makers of carbon black in India and seventh largest in the world. This product is a raw material used in the production of automotive trye is produced using carbon black feedstock and tar oil. But all this does seem to be getting translated into good numbers. For Q4FY14, the company posted a net profit of Rs.2 crore compared to the profit of Rs.5 crore in Q4FY13 but its better than the net loss it posted of Rs.15 crore. The flat topline, higher operating costs and very high interest outgo has been denting its bottomline. But its ended the fiscal FY14, with a huge net loss of Rs.86 crore, much higher than the loss of Rs.22 crore of FY13. The company has a huge debt of over Rs.1000 crore and interest outgo for the year was Rs.80 crore.

The company has two segments – carbon black and power. Its margins from carbon black are wafer thin, with EBIT margin coming in for the quarter at less than 2% and that of power came in at 3% compared to 3.6% in Q3. 96% of its income comes from carbon black. The company is facing a double whammy – firstly, the low off take of the auto sector and tyres has affected demand. Secondly, dumping by China and Korea is affecting the margins further. Also its products have to absorb higher raw material costs and this means it is almost never able to pass off 100% price increase to customers. The company’s reserves have come down from Rs.551 crore in FY13 to Rs.467 crore in FY14. Cash balance has also depleted from Rs.74 crore to Rs.11 crore.