Jan 10, 2013 02:11 PM IST | Source: CNBC-TV18

Steel division to perform better going forward: Gujarat NRE

Arun Kumar Jagatramka, MD, Gujarat NRE Coke expects the company‘s steel division to perform better going forward.

Arun Kumar Jagatramka, MD, Gujarat NRE Coke expects the company’s steel division to perform better going forward. Shares of Gujarat NRE Coke surged as much as 9.7 percent in early trade on Thursday at Rs 23.8 after the company reported on strong earnings for the third quarter.

The independent producer of met coke in India reported a net profit of Rs 20.12 crore for the quarter ended December 2012 against Rs 1.90 crore reported in year-ago period. Net sales rose 57 per cent Y-o-Y to Rs 527 crore in the three months period ended December 2012.

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The good performance was on the back of renewed demand from steel plants, Jagatramka told CNBC-TV18. "I think the uptick in gold demand will aid results going ahead," he says.

Below is the edited transcript of his interview to CNBC-TV18

Q: What kind of realisations and volumes have you achieved in coke, which lead to the better than expected numbers?

A: This quarter we achieved good amount of sales. It was because of the additional demand that has been coming from steel plants in eastern Indian. These are far away but ultimately they do add to the revenue. We have been selling quite a bit to Steel Authority of India (SAIL) in addition to our usual customers. That has been giving us additional sales.

Though margins have been a bit tricky, but overall on a nine months era we are looking at healthy margins. June quarter was very bad, September we could turnaround and do something better, but December has certainly been better. We are looking at very positive numbers since mid December. There is a sea change in the steel industry which has not been doing well last six months.

However, I think last few weeks there have been positive developments in the steel industry. There has been rise in steel price and it would consequently add to their ability to pay us better. So, I would expect numbers to get better as we move through the year.

Q: Why were margins softer in the quarter? Whether there were issues of inventory liquidation or any other issues which hurt margins?

A: Inventory liquidation, when particularly you are selling to SAIL. The freight cost is very high in the eastern part, Bhilai and Bokaro. So, the net revenue is lower because of freight equalization that one has to bear.

Q: What's happening in your steel segment, it turned in a fairly week performance in the quarter?

A: Last six months has been bad for the steel industry. However, things are looking up and we had curtailed our operations. Most of the laws that we see in steel is because of the overheads that has been debited to the steel segment. It’s not per se on the margins. Operating percentage margins are positive, but due to of lower turnover and lower production steel segment has resulted into a loss. That is going to change in the current quarter.

Q: What's the latest on the Australian operations where there has been a lot of local opposition to mining activities off-late?

A: I don’t find any opposition to mining activities. We get good support both from the local community as well as from local government. There has been a bit of government levy’s on taxes in the last two years. However, they are also being diluted as the government realised that the mining industry is not something that can bear the brunt of high taxes.

Given the last one year of downturn in the mining industry most of these taxes have been diluted. I don’t find any opposition so I don’t agree with that statement of opposition. Opposition may be from a very small section. Fact remains that mining constitutes the largest revenue earner for the government. It is also one of the largest employment generators in local economy. So, it does enjoy a very good support all around.

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