Use of LNG to help save Rs 10-20 cr/month: FACT CMD

Jaiveer Srivastava CMD, FACT in an interview to CNBC-TV18 spoke about the company’s third quarter earnings and the outlook going forward.The company has shifted to domestic liquefied natural gas (LNG) as their feed stock since the prices have come down, which will help them cut costs but the recovery of losses could take around a year, said Srivastava. They hope to save around Rs 10-20 crore per month on account of this, he added. Earlier the company operated on imported ammonia and the company had stopped using LNG in FY14 due to high prices.The company is also confident of upping their capacity utilisation from the current 83 percent to 120 percent in the remaining weeks of the current fiscal, said Srivastava. Revival of the sick plants is also on the anvil, he added.In the third quarter ended December 2014,  the total income was down 21 percent at Rs 558 crore versus Rs 703crore that was reported in the same quarter last year.  The company reported a net loss of Rs 108 crore versus profit of Rs 15 crore year on year. The total expenditure for the quarter stood at Rs 622 crore versus Rs 751 crore for the same period year ago. However, the finance costs were higher at Rs 47 crore versus Rs 42 crore year-on-year.

Below is the transcript of Jaiveer Srivastava’s interview with Ekta Batra and Reema Tendulkar on CNBC-TV18.Reema: What led to the pressure, revenue is down 21 percent on year-on-year (YoY) basis and what is the outlook looking for Q4? A: The results are still not good even in Q3. There are various reasons for it that we were operating on imported ammonia. The logistics are very difficult and then whenever we go to the market to start taking ammonia and other material, every price goes up; that is one of the important things. However, I am here to share with you that on 10th of this month we have started with LNG and on real competitive rates. Ekta: Do you expect your EBITDA loss at least to reverse in the coming quarters because of the change in the fuel that you will be using? A: We are definitely going to curtail our losses because of the feed stock which now we are going to utilise. However, yes we still have to go for a full steam of at least a year or two, and then only we will be able to come in the breakeven.

Reema: Is there any way to asses how much benefit using LNG it will be to company’s operations? A: I would just like to share the statistics with you. In January 2014 when we discontinued LNG, the price was different and now we have got it on USD 10.9 per mmbtu. We are definitely going to save something around Rs 10-20 crore per month because of the use of this particular feed stock. Ekta: What is your capacity utilisation at this point in time, what are your factories running at in terms of total utilisation rates? A: At the moment utilisation was hardly 82 percent which also we were able to get it only in Q3. However, now because of this LNG, about one and a half months are left during this financial; we will be able to produce that around 120 percent. That is a big capacity utilisation we were not able to get it during previous three quarters. Reema: Has there been any progress on the revival of Talcher as well as your other sick units? A: Yes it is going on but government wants that we should use our own internal resources and we are trying for that.Ekta: Can you tell us what the progress is specifically on Talcher because the last time we heard that there will be a consortium of PSUs which will be taking it over including Rashtriya Chemicals and Fertilisers (RCF) as well as Gas Authority of India (GAIL) something which has been spoken about multiple times on Talcher? What is the amount which is required for the revival and how will it be funded and what will you possibly be contributing? A: We don't have any unit at Talcher. We are having two plants only in Kochi.

Ekta: What about your own units, anything which needs revival? A: Yes, we are working on that. We are going to expand our capacities in almost all the plants in our finished products as well as intermediate. As far as NPK is concerned, we are at the moment having a production of about 2500 metric tonne per day which we want within one year to increase it to another 1000 metric tonne per day and in five years another 3000 metric tonne per day. Besides this we are also going to have to strengthen our logistics. So we intend to commission six more barges for our raw material distribution to various plants from the islands.