Hind Glass sees German arm turnaround this fiscal

Hindusthan National Glass & Industries is expecting Agenda Glas AG, the sick German bottle maker it acquired a year back and renamed HNG Global, to turn around in the current fiscal.

Also, its new venture of making float glasses via subsidiary, HNG Float Glass, is likely to break even in 2012-13, a company official said.

“Both HNG Float Glass and HNG Global are gradually moving towards profitability and are expected to break even in fiscal 2013.

Our German operations are currently in the turnaround phase. As the capacity utilisation improves and costs are effectively managed, we expect our German subsidiary to break even in the forthcoming quarters,” chief finance officer Laxmi Narayan Mandhana told analysts on a conference call.

Detailing the steps to turn around the once-bankrupt Agenda Glas, which was acquired through insolvency proceedings, Mandhana said efficiency levels, or pack-to-melt ratio, that measures rejections, has now improved to 80% from a low 60% when the plant was acquired.

“Contracts with distributors, who had earlier deserted Agenda, have been renewed; our new warehouse in Germany would be ready for use in the second quarter resulting in lower logistics expenditure. With introduction of energy efficiency measures, power costs are expected to reduce by 28% from January 2013.”

Coupled with these productivity-improving measures, prices have been hiked by 8% effective April, and all these would help contribute in generating profits in coming days, Mandhana said.
Turnover of German operations, which was euro 19 million in fiscal 2012, is expected to touch euro 30-32 million this year.

HNGI’s expectation of turnaround of its float glass business comes despite its losses rising sharply from Rs18 crore in 2010-11 to Rs27 crore in 2011-12, which Mandhana attributed mainly to predatory pricing strategy by a dominant market player in the second half of fiscal 2012.

“It was a tactical move by an industry major to bring down some of the existing players. So, prices during the later half of the year were not reflective of free demand-supply scenario. We are confident that our float operations would breakeven in fiscal 2013,” he said.

The HNG Float Glass plant, in which International Finance Corp and DEG of Germany hold stakes, was commissioned in February 2010 at an investment of Rs550 crore at Halol in Gujarat and makes toughened and insulated glasses for automobile and construction industries.

With the expected commissioning of 600 tonne per day (tpd) plant at Naidupeta in Andhra Pradesh next month, HNGI’s own domestic glass bottle capacity is set to touch 4,395 tonne a day. About 650 tpd capacity was added at Nashik in February.

“Brownfield expansion at Nashik is strategic to expanding our reach in the western region while the Naidupeta unit would be instrumental in enabling our market share in South, the fastest growing market for alco-beverage industry in the country,” Mandhana said.