• PAGE ONE
• INDEX
• HOME

Sical net up 8% at Rs 26 cr -- To get out of loss-making businesses

Our Bureau

CHENNAI, June 20

SOUTH India Corporation (Agencies) Ltd (Sical) has reported a net profit of Rs. 26.01 crores for the year ended March 31, 2000, as against Rs. 24.02 crores in the year before -- a growth of 8.2 per cent. The board has recommended a dividend of Rs. 2.50 p er share.

Sical's turnover during the year amounted to Rs. 1,931.9 crores (Rs. 1,782 crores), a growth of 8.36 per cent. Bulk of the turnover -- Rs. 1,220 crores -- came from the logistics division, of which around Rs. 800 crores came from one single bus iness operation, viz., the contract for handling coal for TNEB at the Chennai port.

The company's profitability was affected by the sugar division (formerly South India Sugars Ltd), which caused the bottomline to decrease by Rs. 20 crores. The plantations (coffee), palm oil and refractories businesses proved to be a drag on Sical, which otherwise performed well during the year, Mr. Ashwin C. Muthiah, Chairman, Sical, said at a press conference on Tuesday. The refractories division made a loss of Rs. 1.4 crores (Rs. 5.5 crores loss in the previous fiscal).

Sical is in a variety of businesses, such as providing logistics services, automobile dealership, sugar and liquor, plantations, auto components and refractories. Between 1995 and 1998, several companies of the M.A. Chidambaram group -- ACT India L td, Indrad Auto, Tubes & Malleables, VRW Refractories, South India Sugars, Southern Agrifurane and a host of small-sized investment and real estate companies -- were merged with South India Corporation (Agencies) Ltd, to form the Rs. 1,900-cror e Sical. Size and synergy were cited as reasons for the mergers.

Today, the management intends to hive off and get out of several of these very businesses, so as to focus on its core competencies of logistics and marketing (vehicle sales).

Accordingly, the plan is to spin off the auto components business into two companies and form joint ventures with the two foreign collaborators, viz., Mitsuba Corporation of Japan and Johnson Motors, for their respective range of products.

A search is on for a buyer for the plantations, palm oil and refractories businesses. Mr. Muthiah and the Managing Director, Mr. Tony Adam, said that the company would like to retain the sugar business, but would not mind selling it off if ``somebody com es along with the right price.'' ``There are no sentiments,'' Mr. Adam said.

The company expects to do better in the current year and has fixed itself a profit target of Rs. 40 crores. Mr. Adam justified the target saying that getting out of loss-making businesses would lead to improved profitability. Besides, the sales of divisi ons would fetch cash, which could be used to retire some of the high-cost debt. Sical's interest cost last year was Rs. 57.75 crores, up from Rs. 54.87 crores in the previous year.

Improved performance in the logistics, getting out of loss-making divisions and lower interest costs would ensure better performance in the current year, Mr. Adam said.

The sugar division is not seen as a millstone-around-the-neck, mainly because the company is contemplating a 23-MW co-generation facility at a cost of Rs. 75 crores.

The cogen plant is expected to be commissioned by January 2002. Sical itself will use only seven MW and the rest would be banked with the State grid and sold to other group companies. Electricity sales will nurse the division back to health. However, som e measures are being taken to improve the sugar recovery and Sical hopes that if sugar prices firm up, the division would do well.

Meanwhile, Sical has formed a joint venture with an Italian partner, Sical Cocclericci Logistics Ltd, which will provide offshore transshipment logistics to clients in India.