Key takeaways of the call

• Net Sales grew by 14% to Rs 421.85 crore during the quarter ended September 2011, while the Net profit declined by 39% to Rs 16.76 crore. During H1 FY 12, the Net sales grew by 16% to Rs 855.66 crore, while the Net Profit declined by 27% to Rs 42.85 crore.

• Production volumes increased by 8.27% in Q2 FY 12 as compared to Q2 FY 11, while the sales volumes reported a marginal improvement over the corresponding quarter last year.

• Realizations improved by 12.4% owing to the price hikes that the company implemented over the last 12 months.

• Power and fuel cost, which constitutes around 40% of the total cost of the production, escalated by 39% in comparison to Q2 FY 11. While the raw material cost increased by 17% further exerting pressure on the margins. The OPM declined by 300 bps to 16.5% during the quarter.

• Increase in the base rates announced by banks resulted in the increase in the weighted average cost of borrowed funds and further increased usage of debt financing by Rs 5451 million has also contributed to higher interest cost.

• The company expects that increasing volumes and realizations in the coming quarters should enable the company to post improved margins. As the additional capacities go on stream, the production and sales volume are expected to improve significantly.

• Going forward, the company is evaluating further price increase in December 2011 to offset higher raw material cost and mitigate the cost pressure of the past.

• The company has a market share of 55% in the container glass segment. It has an installed capacity of 3307 TPD and has planned expansion to 5570 TPD by FY 15.

• The brownfield capacity expansion of 650 tonnes per day with a total expenditure of Rs 725 crore at the existing plant at Nasik facility is progressing well and is likely to be commissioned by the quarter ending March 2012.

• Construction of the Greenfield glass-manufacturing complex at Naidupeta in Nellore district of Andhra Pradesh with initial investment of Rs 800 crore is on schedule and expected to commence in the quarter ended June 2011.

• The company is integrating state of the art technology in facilities through the latest capacity expansions and will lower interest cost by incorporating further efficiency and improving productivity. This is expected to reflect in the operating performance from the quarter ending June 2012.

• In May 2011, HNG acquired Agenda Glass (AG), Germany and established presence in one of the largest markets for food and alco-bev industries in the world.

• The company expects Agenda Glass to contribute in the total revenues and also to the bottom line by the next financial year 2012-13.

• The acquisition of the Agenda Glass and capacity expansions are partly being funded through long tern debt.

• The long term debt of the company stood at Rs 816.42 crore and the short term debt stood at Rs 240.73 crore during the quarter ended September 2011.