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Sunday, February 05, 2012
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Price Revision Letter for Customers
Dear Valued Customer & Friend,
In our last price revision communication to you (w.e.f. July 16, 2008), we had highlighted in considerable detail on how Aluminium prices continued to be seriously affected by the skyrocketing LME levels and depreciation of the Indian Rupee. In addition to the above we were beset with the inflationary impact of spiralling prices of almost all the direct and indirect inputs. We had earnestly hoped and prayed that the commodity prices would get under control sooner rather than later and that LME would come back to some semblance of normalcy.
A Dip in the Trend
As is evident from the graph 01 below, the average LME levels have decreased from USD 2940 in the April-June '08 quarter to USD 2792 in the July-Sep '08 quarter.
However, the Indian Rupee has continued to depreciate sharply against USD. From an average level of Rs. 41.90 per USD in Apr-June '08 it has gone to an average of Rs 43.78 to 1 USD in the July-Sep '08 quarter, touching Rs. 45.00 to a USD in September 2008. Currently it is trading at Rs. 48.90!
The net sum effect of the above two factors, i.e. decrease in the average LME and the sharp increase in the exchange rate, has resulted in zero net change in the cost of litho-grade Aluminium coils to us. The quarterly revision in the prices of our PS Plates reflects exactly the change in cost of Aluminium litho-grade coils of the previous quarter.
No Price Revision
As you would recall, there was a steep increase in the Aluminium costs in the earlier two quarters (Jan–March '08 and April-June '08), necessitating a cumulative increase of Rs. 30.50 per sqmtr in the base price of our PS plates, in subsequent 2 quarters. However, considering the adverse effect of such a high increase of Aluminium price and the feedback from our valued customers, we had increased the base price by only Rs. 28.00 per sqmtr, cumulatively in the last two price revisions (Rs. 12.00 per sqmtr wef April 16, 2008 and Rs. 16.00 per sqmtr wef July 16, 2008).
Further, as mentioned in our last price revision communication (w.e.f. July 16, 2008), over the last 12 months, there has been a steep increase in the cost of Power, Packaging material, Freight costs and other input costs, to the tune of Rs. 8.00 per sqmtr. However, despite our understanding as per the MOU with AIFMP, that the increase or decrease in the unit cost of major direct inputs will be passed on once a year, at the beginning of the fiscal year, we have not done it so far considering the high impact of Aluminium price increase itself. Hence, the last two price revisions does not cover at all any increase of our other direct input costs over the last one year. We will have to consider factoring in the same in our future price revisions.
In view of the zero net change in the cost of Aluminium in the July-Sep '08 quarter and as per the formula for price revisions, we have decided to retain prices at July 16, 2008 levels. Hence we will not make any revision in the prices of our PS Plates this quarter and the current prices will continue to remain in effect for this quarter too.
Cost-saving Solutions
As before, you will continue to receive an attractive cash discount of 5% on the prices mentioned in the Revised Price-list from your TechNova dealer, on making cash payments for your purchases. This discount is significantly higher than the interest cost on the additional working capital that you may require to switch over from credit to cash purchase.
The Companion Scheme, introduced for the free supply of certain high performance chemicals to enable you to enhance your productivity and reduce costs, will be continued, and we urge you to contact your TechNova dealer and continue to avail the benefits of this scheme.
Future Scenario
Since the beginning of October 08, we are witnessing significant downward trends in price of all commodities including Aluminium, on the LME and we hope that this trend continues. Currently Aluminium is trading at levels of USD 2000/Tonne. However the rapid depreciation of Indian Rupee against the US Dollar has come as a shocker to one and all. Currently the Rupee is trading at levels of Rs 48-49 /USD. This has resulted in increase in the net cost and thereby neutralising the gains made by the decline in LME prices. Further, as mentioned earlier, the increase in other direct input costs during the last 15 months remain unrecovered and are severely impacting our bottom-line. We hope and pray for an overall reduction in the various input costs to us in the coming quarter so that we are be able to pass on the benefits of lower net cost to our customers in the future price revisions.
We once again seek your understanding and support to tide over these uncertain times.
With best regards,
C. G. Ramakrishnan
Executive Director & Chief Operating Officer
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