INEOS ABS (INDIA)/ABS Plastics Good bet

Known earlier as ABS Plastics , it is now a 51% subsidiary of Lanxess India, which is 100% subsidiary of LANXESS AG Germany. The company has a manufacturing plant in Nandesari, Moxi which manufactures ABS with an annual production of 60,000 TPA to be increased to 80,000 TPA by 2007-2008 and further to 100,000 TPA which is to be funded through internal accruals. The company`s products are used as raw materials in many households, automotive, electronic and telecom sectors, with a clientele list to include names like Samsung, LG, Videocon, BPL, Ford, Hero Honda, Cello, Lexi and Bajaj.

For the second quarter ended 30^th June 2008, the company has posted a resounding performance on a QoQ but YoY, profit margins have slipped. YoY, net sales rose 8% but EBITDA was down 15%, PBT was down 20% and PAT was down 19%. QoQ, the story is completely different. Net sales rose 15%, EBITDA was up 61%, PBT was up 96% and PAT doubled. Interestingly, it is a zero debt company as it has no interest outgo.

The improvement in turnover was mainly attributed to three specific business units - performance polymers, advanced intermediates and performance chemicals, which showed a sales growth of 83%, 89% and 31% respectively as compared to last year.

The company’s R&D facility at Moxi, Gujarat is one of its strongest points. Rated as one of ghe best in the business, this centre is currently being engaged in research and development in areas of engineering thermoplastics for Lanxess’s global operations. The company plans to further upgrade its R&D facilities and its main focus will be on high-grade ABS which is a metal substitute at lower costs.

With the slowdown in the economy, especially in the auto sector, the third quarter is expected to witness some pressure on margins but that could be offset to some extent by high value added products. Currently quoted at Rs.150, stay invested.
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