RCF Net Up By 37%, Margins Improve

The Rashtriya Chemicals and Fertilisers (RCF), a state-owned company, has reported a good set of numbers for the third quarter of the current fiscal. It reported a 37% growth in its net profit to Rs 74 crore. Its topline, however, remained flat to Rs 1568 crore. For the first nine months of the current fiscal, the company has reported a 20% growth in its topline to Rs 4718 crore. Net profit, too, has increased by 20% to Rs 163 crore, indicating a good year for the company.

During the quarter, company has seen a 38.6% rise in revenues from its Thal plant. The Trombay plant, on the other hand, has seen about 7% decline in its revenues. Its trading business has also seen a 42% YoY decline in the revenues to Rs 261 crore.

On the EBITDA front, RCF has reported a 305 basis points margin expansion in the December 2012 quarter on a YoY basis. RCF's robust performance on the EBITDA front has been a result of a decline in the Trading business which has thin margins.

The company has reported PBIT margins of the trading business at 7.26%, compared to the loss at the PBIT level a year before. Its Thal plant has also seen a margin expansion from 4.83% a year before to 8.51% in the December 2012 quarter. Widened margins from its two businesses have shadowed the poor performance of the Trombay front, which has reported decline in the margins.

Interest income during the quarter has increased by 61% to Rs 14 crore. Effective tax rate, on the other hand, has declined sequentially as well as on a YoY basis, which resulted in the higher net profit for the quarter.

The better performance of RCF during the quarter has been on account of a robust performance of its Thal plant. RCF is set to increase the Urea capacity at Thal by setting up one single stream ammonia plant (2200 MTPD) and one single stream urea plant (3850 MTPD). The expected project cost is Rs 4000 crore and the project will be completed in the next three years. This will help the company to further increase its operational and financial performance.

Despite this performance, RCF has failed to gain on the bourses. Fertiliser stocks are in pressure due to a lower gas supply to the sector. We would advice our readers to wait until the gas issues in the countries are resolved. At the current price, it better be avoided.