Jindal Saw may commission its iron ore mines by June

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Jindal Saw may commission its iron ore mines by June

The profit after tax of Jindal Saw was hit on account of high interest rates and forex fluctuation losses, informs managing director Indresh Batra.

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Excerpts from Midcap Radar on CNBC-TV18 Watch the full show » ALSO READ See latest News about Jindal Saw See previous management interviews See what other Experts & Brokerages are saying about Jindal Saw

The profit after tax (PAT) of Jindal Saw was hit on account of high interest rates and forex fluctuation losses, informs managing director Indresh Batra

The pipe maker posted nearly 70% decrease in net profit at Rs 37 crore for the quarter ended December 31, 2011 as compared to Rs 125 crore for the same period last year.

"Our raw material cost, as a percentage to our top line, has moved up by about close to 600 basis points. This has an effect in terms of absolute numbers plus our dispatches were lower than what we had produced," Batra told CNBC-TV18.

Below is an edited transcript of Batra exclusive interview on CNBC-TV18. Also watch the attached videos.

Q: Can you take us through the numbers?

A: We had an okay set of numbers. In the topline, we had Rs 1100 crore of topline. This was slightly depressed because of issues related to the shipping of our large diameter pipes-a major overseas order. It will get reflected in the coming quarters. So, there is some deferment of revenue.

Our EBITDA margins have been lower compared to the same quarter last year in the sequential quarter because of the higher cost of raw material, which is primarily true for our ductile iron pipe business. Our seamless business has been very robust.

This definitely is the reflection of some of the high cost pricing on the commodity side we had seen for the reporting period.

Q: So what's the EBITDA margin?

A: We are about Rs 140 odd crore of EBITDA, which is about 13% of our topline. We have been on a trend line doing about 16-18%, so this is lower. But as I said, about 600 basis point is on account of the increase in the raw material and also on the per tonne basis, since we are on a conversion business, our EBITDA margins blended is about close to Rs 9000 per tonne, which is strong, but since the cost have bee booked and some of the dispatches got delayed to the tune of about Rs 300 crore odd, so that also is skewing the picture for the lower EBITDA number.

Q: GAIL order for HSAW pipes in Q2 had pulled margins down but the expectation of the street was that those are behind us, so margins should improve sequentially. What you are saying is that we still have some of these legacy orders being executed, which is why the margins have been depressed? By when do you expect to recover it?

A: This was a very large order, the GAIL order, which was HSAW order. We had part of that, which was close to 13,000 tonne, but the affect is disproportionate because instead of producing 200,000 tonne of these pipes, we produced about 80,000 tonne in terms of sales.

So in terms of recovery, our most of the new order book is fairly remunerative. Our ductile iron pipe segment should show strong growth given the fact that the commodity prices have come down, they have softened. Expansion in terms of our volume and backward integration to iron ore mines, which we have in Bhilwara, should support our key businesses. We are very hopeful that our performance is strong.

And if you were to also look our performance in terms of how the peers have performed, we have performed much superior compared to rest of the players who have shown losses. Our model was always a counter cyclical model of having a multiple product portfolio, not just being a seamless company, not just being a ductile iron company with a large diameter.

I am quite hopeful that going forward the projects, which we had undertaken on the capex side, should substantially improve our profitability. 

Q: What was the blended EBITDA per tonne? Last time around we had about Rs 7,300. What's been the figure this time around?

A: Just little over Rs 9000 per tonne.

Q: I am missing a fundamental figure. What's your profit?

A: On the EBITDA level is Rs 140 crore; the profit after tax is Rs 37 crore.