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Saw Pipes Ltd sees higher profits, greater demand

Steel pipe maker Saw Pipes Ltd said on Tuesday that it expects its strong order book to boost profits this year and global investments in oil pipelines to lift demand in the years ahead.

Saw Pipes, the largest Indian maker of 'submerged arc welded pipes' used to transport oil and gas, last week reported net profits of Rs 201.11 million in the six months to December, nearly 20 times the Rs 12.12 million it posted in the same year-ago period.

The firm's revenue nearly tripled to Rs 2.04 billion in the half year to December from Rs 754.6 million in the same year-ago period.

"What we have executed is Rs 2.04 billion (of our order book). If you go up to June, it is Rs 3.0 billion plus -- the orders to be executed," Saw Pipes vice-president for finance Abhay Bhargava told Reuters. "Of this, exports are about $40 million."

Earlier this year, the firm procured a $35.4 million order from Burullus Gas, a consortium of state-run Egyptian General Petroleum Corporation, British Gas and Edison Gas. Exports vary from 40 to 60 per cent of sales each year.

Bhargava predicted net profit for the current year to June would rise in proportion to the orders to be executed.

"You can extrapolate on what has been done till now," he said.

In the year to June 2000, Saw Pipes earned a net profit of Rs 118.36 million, on revenue of Rs 3.09 billion

Improved profitability, helped Saw Pipes' shares to surge over 300 per cent since December 1.

Bhargava said high world oil prices had pushed the petroleum industry into a virtuous investment cycle and demand for its products will rise in the years ahead.

"In the last four years, the industry was really down so the (upward) cycle would last for a couple of years at least. I am very bullish about the international market especially in Central Asia, Africa and South East Asia," he said.

A number of pipeline projects had been planned in India as well, like the doubling of GAIL's trunk HBJ pipeline and Indian Oil's Salaya-Mathura pipeline, Bhargava said.

India transports just 45 per cent of its petroleum products using pipes, considered low by international standards, so the potential for laying new pipelines is considered good. Several more would come up on India's west coast considering the number of LNG terminals that had been planned there.

The cost of transporting petroleum products by pipe is a sixth of that by road or rail.

Bhargava said the good order book should also help the firm wipe out its current debt of about Rs 1.8 billion. "By 2002, we would have succeeded in reducing our debt almost completely and that will help save costs further."

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