Glass Industry

Revival in Real Estate Could Come as a Boon for Float Glass Industry

When major sectors in the economy do well, it augurs well for several ancillary industries that depend on them. A case in point is the Rs 5,500-crore Indian glass industry, which has shown good growth in the past few quarters driven by an uptick in demand from user-industries such as infrastructure, construction, automobiles, food processing, beverages, pharmaceuticals and cosmetics, among others. The past four quarters have seen a steady growth in the fortunes of glass companies —with some of them swinging to profit.

For the industry, FY09 was not particularly favourable. During the first half, when demand was relatively buoyant, companies faced soaring prices of key inputs. And during the second half, when commodity prices stabilised, demand stagnated due to the economic slowdown.

In FY2010, with economy coming back on track and input costs remaining benign, the industry is again witnessing a revival as reflected by the improving financials.

Robust growth in automobiles, infrastructure, liquor & other beverages, boom in building and construction have enabled the companies in the glass sector to post healthy results over the past four trailing quarters.

Hindusthan National Glass, the market leader in packaging glass, has reported 4% Y-o-Y increase in its revenues and flat growth in profit. With its prime customers in food processing, liquor and pharmaceutical industry registering growth in volumes, the company is already seeing signs of recovery in demand. It’s expecting to close the fiscal with a 75% increase in profit and more than 20% increase in revenues. Asahi India Glass, a major supplier of float and sheet glass to the auto industry, has posted a 8% growth in its consolidated net sales over the past four trailing quarters and significantly reduced its loss to Rs 5.5 crore against Rs 58.3 crore a year ago. With auto sales growing at a healthy pace, the prospects for this company also are bright.

Piramal Glass, an export-oriented specialty glass player, has started showing signs of recovery and swung to reporting profits since the past two quarters. Catering to the packaging needs of the fast-growing cosmetics and perfumery sector, the company is steadily gaining market share in the overseas market on account of being a low-cost manufacturer. With crude oil prices remaining stable over the past couple of quarters, the industry has seen an expansion in the operating profit margins.

With stability on the cost side and good outlook on the demand side, the packaging glass segment has good prospects. The float glass segment, with its primary use in the real estate industry, is seeing good demand pick-up from the residential real estate segment. With commercial real estate sector showing signs of revival, the prospects of float glass industry are likely to improve over the next few quarters.

Source: TheEconomicTimes