In its 100th year, Century Textiles, the B K Birla flagship, posted one of its worst ever performance with profit falling 98 per cent to Rs 2.67 crore for 1996-97. The company had posted a net profit of Rs 194.75 crore in 1995-96.
Hit by high interest costs, sluggish market for cement and paper, Century suffered a loss of Rs 30 crore in the second half compared with a Rs 34.18 crore profit in the first half.
The Century scrip lost Rs 142 on the BSE after the results were announced. The scrip ended the day at Rs 2,259. On the NSE, the scrip ended at Rs 2279.10, down Rs 119.95 from its previous close.
The scrip opened the day at Rs 2,381 on the BSE and initially shot up to Rs 2,600 as soon the company announced a 1:1 bonus. However, following the announcement of its results, it came under severe selling pressure and hit the lower end of the circuit filter at Rs 2,190 before edging up to Rs 2,259 at close.
The scrip also figured among the top 10 active scrips in the A group with a turnover of Rs 14.69 crore.
EPS fell to less than Re 1 per share from Rs 418 per share last year. (Part of the reason is also that EPS for 1996-97 has been calculated on the face value of Rs 10 per share.)
Helped by rise in other income and capitalisation of some interest burden, the company managed to claw its way to profitability. Other income rose from Rs 51 crore to Rs 59 crore.
Century Textiles chairman B K Birla said the company was hit by poor market conditions in three industries: cement, paper and shipping. There was complete chaos in these three industries from the second half, though in the first half, we made some money in cement, and paper capacity utilisation was good.
The Century results were announced after a board meeting in Mumbai yesterday. The company also announced it was reducing the face value of its share from Rs 100 to Rs 10. Dividend at Rs 60 per share has been paid out of reserves.
Centurys turnover rose 11 per cent to Rs 1,990 crore from Rs 1,779 crore last year. Operating profit fell 14.1 per cent to Rs 289.25 crore.
Reliance on high-cost borrowings cost the company dearly as interest costs zoomed 218 per cent to Rs 162.07 crore. At the end of 1995-96, the company had a debt-equity ratio of 1.25. All its new projects were financed through high-cost borrowings. Though the cash-flow position was comfortable, lack of adequate returns from newly commissioned units hit profitability.
It was a classic case of revenue generation from new units being insufficient to cover high interest expenses, said a textile analyst at an FII.
Commissioning of new projects boosted depreciation to Rs 123.94 crore from Rs 90.90 crore, thereby affecting profitability. Century commissioned two units in 1996-97: the one-million-tonne Maihar unit and a two-million-tonne cement unit.
Centurys inability to operate the bagasse-based plant at full capacity also contributed to the problem it had to pay a high interest on the newly commissioned plant.
In a statement, the company admitted that the cement division performed badly, but blamed frequent power cuts ranging between 40 to 60 per cent for it.
Birla said: In just three months, cement prices in the Maihar region fell Rs 400 per tonne and we ended up losing Rs 4 crore per month. Cement prices in central India, where Century has all its plants, fell year-on-year from Rs 130 per bag to Rs 114 per bag, before recovering to Rs 118 per bag.
Century was also hit by poor production at the bagasse-based paper plant in Uttar Pradesh: the output fell to 35,000 tonnes for the full year against an installed capacity 84,600 tonnes. Poor paper prices throughout the year also impacted turnover.
The rayon wood pulp division was also hit badly on account of cheap imports. Global wood pulp prices which were at around $1,200 per tonne more than a year ago fell to $300-$400 per tonne. Domestic producers were forced to cut from over Rs 30,000 per tonne to Rs 23,000 per tonne.
