Asahi India Glass promises good growth

The company is increasing its focus on the float glass business.

Sanjay Labroo of Asahi India Glass said that the company's profitability in the first half was impacted by one-time events, which are not likely to be repeated.

Labroo told CNBC-TV18, "If you look at the first six months result, they have been influenced to a certain degree by what I call one-time events. We were a little late in expanding our auto capacities in Chennai, and, because of that, we had a lot of expenses, which was uncalled for, on air freights. That really affected our profitability. We supply to 90% of the passenger car market in the country. There was a big adjustment in some raw glass prices. A lot of our results have been dampened by one-time events. I don't think in my company the story is about growth without profit. The six months have shown growth without profit because of certain events which are not going to be repeated."

When asked about the kind of growth he expects, he said, "Our assessment of the underlying market will provide 12%-15% linear growth. Our past record of the last 16 years show an average growth of 25% in sales and 35% in profit. Whether we can replicate that, or continue with that story is where we will be tested on. We are confident about achieving lower than 20% on sales and higher than 20% on profit over a time frame of three to five years."

Talking about the demand and the cost aspect of the company, Labroo said, "The demand is very buoyant. If you see the last 10 years average there has been about 12% growth per year. But, if you see the last two years average, it is 18% growth. Within this overall demand profile, there are many good stories. The demand for coloured glass, thick glass, and value-added glass is rising much faster than the demand for ordinary glass.

He attributes the demand buoyancy to not just the housing or auto boom, but because of substitution. "People nowadays instead of wood want glass. So, there has been a shift in the customer's preference. On the cost side, there has been some costs which have gone up. The cost of soda ash and oil prices have gone up considerably. A good business' duty is to absorb cost, to try to recover in prices as much as possible and, at the same time, to build profitability. It's been a one-time thing where some commodity prices have gone up, although they are now flattening out."

He also said, "There is tremendous value-addition increase that's going on in the auto industry. For example, if you take a car today to a car which was made in early 1990s, it has 30% more glass in it, and many more value-added features like printed glass, laminated glass etc. So, it's not just the price that needs to be improved. I think value addition stories are far more important than cost and price stories and, in that respect, our first square metre recovery has been going up."