Somany requests govt to up anti-dumping duty on vitrified tiles

Somany Ceramics has requested the government to consider raising the anti-dumping duty on vitrified tiles from USD 1.37 per metre to USD 2, MD Abhishek Somany.Speaking to CNBC-TV18, Somany talked about the company's business outlook, saying he expects the second half of FY17 to be better than the first half.With increased government spending, and with consumer sentiment gaining momentum, Somany hopes the overall industry growth to be in double digits this year.Below is the verbatim transcript of Abhishek Somany's interview to Reema Tendulkar and Mangalam Maloo on CNBC-TV18. Reema: First let me start with the quarter gone by, how is it without getting into specific numbers was it in line with the market expectation, how was demand and did you benefit from the anti-dumping duty which is imposed on April 1 from imports from China? A: I can’t talk of specifics because we are too close to our results, but overall what I can is H1 is generally not very good compare to H2, but overall things are looking better since last year. The government spending is up, the retail is inching back. The private builder is still under certain stress, so that’s a concern, so from that point of view it is seeming to be little better. As far as anti-dumping is concerned obviously it has helped a little bit with the preliminary duty at USD 1.37, however we are asking the government to increase the duty to USD 2 and above per square metre specifically because China is further dumping and also the freight rates have come down to under USD 200 per container from China. Mangalam: In that case could you tell us what kind of volume growth are you likely to see in this fiscal, at the same time you have increased your capacity by about 7-8 percent, so like to like volume growth as well as overall volume growth that the company is likely to see in FY17. A: So overall the growth was led by volume which was the positive even last year, so this year whatever the growth would be largely led by volume once again for the industry and also for us. Reema: You spoke about having taken up a proposal to up the anti-dumping duty from China to USD 2 per square metre from USD 1.37. What has been the response, is that something that we should expect an increase in the anti-dumping duty amount? A: So the preliminary duty as I said was USD 1.37, it generally takes about 6 months for the government to come out with the final duty, so we are expecting it anytime between now and September and we have filed enough papers to prove our point that transportation is something which should be added on to the duty to come out with the final duty, because the transportation within India is so much and from China it has come down to under USD 200 per container, which is really hurting the industry more specifically in the port towns which is for example Chennai, Bombay, Cochin, Calcutta, so it’s hurting the industry. If they don’t increase the duty and the freight rates keep falling it would be a concern. Mangalam: Last quarter we saw some benefits of the lower gas prices coming by to your margins, what kind of margins can we expect in FY17? A: The gas advantage continues, obviously the gas advantages for the entire industry, so quite a bit of it has been passed on, but some of it has been retained and you will see that coming through in terms of bottom line, although that would not be the only reason why the bottom line would go up. It is also our own strategies of unlocking further working capital and more importantly moving our value added mix, so the last production which you mentioned earlier, which we have done increase capacity is also in the value added space, that also should add to the margins in the next three quarters. Reema: You said this year is looking better than last year FY16 volume growth was 9 percent, double-digit volume growth for you as well as for your take on the industry volume growth for FY17? A: Well, we hope so for sure we would be double the industry volume that’s for sure. It is yet to be seen what that number would be, but we are hoping that it would be in line with what we were last year at a larger base, like I said with the monsoon coming up and the monsoon really going well, I think H2 is looking very positive, so overall we are extremely positive for the industry. Reema: So you are saying double the industry growth rate in terms of volumes, but it should be similar to what the company clocked in last year? A: Hopefully, yes absolutely, maybe we should be able to do a little better. Mangalam: You also have some capex that Kassar plant which did get completed. How much will that contribute to your revenues in this fiscal? A: That was again a value added capacity which we added for Rs 80 crore in the Kassar, Haryana plant for glazed vitrified tiles, so that would add significant amount to the bottom line, the top line is being shared between our capacity which we already had built in the Gujarat plant, so the overall capacity addition would be about 2-2.5 million only. Mangalam: And if you could put a number to the kind of margin expansion that you would see as you had told us a couple of answers ago? A: So we have been maintaining, I think the last analyst report also suggests that, so we have been maintaining that we should be increasing our margins by about 0.5-0.75 basis point on profit before tax (PBT). We have increased that a little bit by 0.25 because of the lower gas prices, so I think we are well poised to deliver that.