Power Cut Hurts Siltap

For the year ended July 1996, the company's sales could rise only by 4.26 per cent, to Rs 40.34 crore. This was Rs 9.27 crore lower than the projected figure of Rs 48.27 crore.Stabilisation of the new plant was delayed due to damage to key equipment's. This forced the company to find replacements for them.

On the other hand, the depreciation of the rupee has also affected it's performance, particularly when it imports a high percentage of raw materials.As a result, operating profit declined from Rs 10.93 crore to Rs 9.85 crore. Operating profit margins also dipped from 28.25 per cent to 24.41 per cent. Withdrawal of the ICDs led to lower earnings under the 'other income' head.

That apart, a sharp increase of 73 per cent in interest cost to Rs 2.01 crore and higher provision for depreciation, at Rs 1.38 crore, has further affected the bottomline. Net profit declined by 28 per cent. However, lower profits did not deter the management from rewarding its shareholders with a bonus issue in the ratio of 1:2.

Cross Laminated Film, the only product, is made under a technical and financial collaboration with Rasmussen Polymer Development AG, Switzerland. The film is used in packing granules and chemicals, and in tarpaulins. Considerably outperforming its closest substitutes, namely rubberised and plastic tarps, the high import cost of raw materials is the only factor which undermines the cost effectiveness of the final product.

To reduce its one-product dependence, Siltap recently developed a Green House Film which would prove beneficial for horticultural purposes. Lower profits have, not prompted the company to embark on any unrelated diversifications. Instead, the company has decided to locally source its raw material requirements and has also increased its current production capacity to 5,400 tonnes. With production on expanded capacities stabilising and the development of a new product application, it should achieve higher growth in the present year.