AIG, a frontrunner in the glass industry is expected to announce its results very soon. It caters to almost all the automobile producers. Its clientele includes auto majors such as Maruti, Hyundai, Ford, Mahindra & Mahindra, Tata Engineering and Toyota. It is expected that on Q-o-Q basis, AIG’s performance will be much better than on Y-o-Y basis. The Company’s financial performance in last two quarters was adversely affected on account of shut down of its float glass plant at Taloja on account of floods. The plant has resumed commercial production from 1^st Nov 2005. On lower base AIG is expected to post a significant revenue growth on Q-o-Q basis. However bottomline growth will partly burdened by increase in interest & depreciation due to capacity expansion carried out by the company.

Another major listed player in the automotive glass segment is Saint-Gobain. In the end of 2005 company had issued disappointing guidelines. It had stated that for next two years company sales, profits and profitability would be affected as it is refurbishing certain old equipments with a view to improve the equipment performance. For this purpose, one of the Company's two plants (located at Chakan) will be shut down. Also the Flat Glass division of Saint-Gobain Group (of which the Company is a subsidiary) has set up a new automotive glass plant in Chennai through its other subsidiary, Saint-Gobain Glass India. Some of the products currently being manufactured at the Chakan plant will now be manufactured at this new plant in Chennai.

Players in the architectural glass segment are also expected to witness volume growth on account of buoyancy in construction industry. According to estimates, the market for architectural glass business is pegged at least 3-4 times the automotive glass business. It is also estimated that in the architectural segment in India, the contribution of value-add segment, i.e., float glass is very minimal (4% of sales in India as compared to 70% in developed nations). Average realisation in the architectural segment is significantly higher in value-add architectural glass. Going forward, there may be an increase in proportion of value added glass in total sales of the industry. Improvement in volumes in on account of buoyancy in construction industry coupled with improvement in realisation of the industry is likely to bring significant growth for the leading players in architectural glass segment such as Triveni Glass. The company has the wide range of float glasses in its product portfolio. Asahi India also has a architectural glass segment division.

For past 3 quarters Triveni Glass has reported abnormally high revenue growth. The company in, 1^st, 2nd and 3^rd quarter have reported Y-o Y revenue growth 150%, 235% and 51% respectively due to lower base on account of closure of the float glass plant at Allahabad for nearly 7 months in FY 04-05.The performance of the company had started showing steady improvement after the resumption of operations in the float glass plant in Oct’04.

Thus, though still the revenue of the company are expected to improve on Y-o-Y basis the growth rate is not likely to be as high as reported in last three quarters on account of higher base in the forth quarter due to resumption of operations in the float glass plant in Oct’04.The company had reported negative interest expenses of Rs 6.52 crore in the quarter march 2006. This is likely to adversely affect bottomline growth.

Players in bottle glasswares segment are not likely to witness any significant improvement in revenue. According to data released by CSO production bottles/bottle glasswares has reported a Y-o-Y fall of 9% in the period April’05- Feb’06. PET bottles and flexible packaging have eaten up the market share of glass bottles. Thus it is expected that players in bottle glasswares such as Alembic Glass will not witness impressive volume growth.

Thus, management of Alembic Glass is planning for restructuring the company. It is planing to amalgamate Shreno Ltd with the Company. It has also filled a petition with the High Court of Gujarat to approve the amalgamation.

Most of the players in glass industry are likely to face margin pressure on account of surge in input cost. Retail soda ash prices for Tata brand in March 2006 were up by 4% on Y-o-Y basis at Rs 13/ kg. Rise in WPI of soda ash has been much sharper. As on February 2006 WPI of soda ash stood at 166.1, up by 11% on Y-o-Y basis. Soda ash accounts for about 30% of cost of production of glass. On the another hand monthly movement in WPI of Bottles and sheet glass indicates that realisations of the players have not improved. It is expected that fall in margins will be much sharper for players using gas for manufacturing glass such as Alembic Glass.

Union budget 2005-06 has been negative for players in glass tableware segment such as La Opala RG as the Government has increased excise duty on glassware from 8% to 16%. Also, reduction in peak customs duties on glass tableware from 15% to 12.5% will further encourage cheap import of glassware in to India.

For other players in glass industry budget has been positive. It is expected that reduction in peak customs duties on soda ash from 15% to 12.5% will reduce the pace of increase in domestic prices of soda ash. For players such as Gujarat Borosil soda ash accounts for more than half of their total raw material cost. Reduction in custom duty on import of cullet may encouraged to use more cullet by glass industry. At present availability of cullet in the Indian market is limited.

Increase in use of cullet is expected to bring down power & fuel cost as use of cullet in the batch (mix of raw material) reduces energy consumption. Some of the players, which at present use cullet, are Empire Industry, Excel Glasses and Gujarat Borosil

Union budget 2006-07 has reduce excise duties on small passenger cars from 24% to 16%.

This is expected to increase sales of small cars. Increase in sales of small cars will in turn boost revenue of players in automotive glass segment such as AIG

Outlook

While automotive glass and architectural glass are likely to witness volume growth on account of buoyancy in the user industry, performance of the players in the substitution of glass bottles by PET bottles & flexible packaging. Glass industry as a whole is likely to face margin pressure on due to surge in input cost, fall in margins is likely to be much shaper player using gas for manufacturing glass.