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May 20, 2013, 03.36 PM IST | Source: CNBC-TV18

Mercator expects interest cost easing to aid nos this year

In terms of business, Patwardhan says the company’s coal volumes were flat in FY13. However, he expects FY14 volumes to be 'substantially better' than FY13.

Prasad Patwardhan, CFO, Mercator Lines says the company has managed to “significantly” reduce its debt on a standalone basis.

“We started the year with a debt of over Rs 1,200 crore and the net debt on the standalone books as of  March 31, 2013 is about Rs 625 crore,” he told CNBC-TV18. 

On a consolidated basis, the net debt of the company stands at Rs 3,100 crore, which is about Rs 250 crore lower than what it was last year. “In the current financial year, on a standalone basis, we hope to post a significantly improved performance. Our interest cost will be substantially lower this year as compared to last year,” Patwardhan says.

In terms of business, Patwardhan says the company’s coal volumes were flat in FY13. However, he expects FY14 volumes to be “substantially better” than FY13.

Also read: Satisfied with Q4 nos; will maintain NIM at 8.5%: PTC Fin

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

Q: In terms of the coal business can you just take us through what exactly that segment comprises of and why you have seen such a strong pick up on a quarter-on-quarter basis on PBIT level as well as on the revenue level?

A: Overall in terms of the coal business, we have seen flat volumes for the whole year. In the year ending March 2012 we did volumes of about 7.5 million metric tonne. This year, we have done about 7.6 million tonne.

In the first six to eight months of the year, we saw a drop in the coal pricing. The coal volumes were flat, but the prices were pretty low in the first six-eight months. However, since January we have seen a pick up in the coal volumes as well. That is why on a sequential basis you are seeing an improvement in the coal numbers.

Q: Do you have any targets for the coal volumes that you might clock by the end of this calendar year?

A: The third mine, in Indonesia, commenced commercial operations during 12-13. We expect volumes to pick up in the current year. We did about 7.6 million tonnes last year, which comprises of about just 1 million tonne of our own coal. We have purchased the remaining coal locally. We expect this year volumes to be substantially better than last year.

Q: You all have been on this debt reduction spree, but your finance costs were higher on a Y-o-Y basis quite significantly as well as on a Q-o-Q basis at around Rs 71 crore. Can you take us through what the debt position stands at for the company at this point?

A: What we have done is we have been able to reduce the debt on a standalone basis significantly during this year. We started the year with a debt of over Rs 1,200 crore and the net debt on the standalone books as of 31st March, 2013 is about Rs 625 crore.

So, we have been able to reduce the standalone debt by nearly Rs 600 crore. On a consolidated basis the net debt as of March is about Rs 3,100 crore, which is about Rs 250 crore lower than what it was last year. So, we have seen a substantial reduction in debt on a standalone basis this year. The reduction in interest cost will be visible during the current year.

Q: Can you tell us a little bit about the shipping business? This time around you have trimmed your losses in the shipping business to about Rs 141 crore versus Rs 300 crore last quarter if I am not wrong. When do you expect to break into black in the shipping business itself?

A: There were some one-off write-offs that we did in our shipping business in the quarter ending December as well as in the current quarter. In December quarter our step-down subsidiary in Singapore entered into three early termination agreements. We booked the losses on termination of those agreements for uncharted vessels in December. We also entered into an agreement for sale of one very large ore carrier in the December quarter.

In the current year what we have done is we have reviewed the carrying value of our tankers based on the discounted cash flow method of future earnings. Accordingly we have recognized an impairment loss of about Rs 90 crore in the current quarter. In terms of our tanker business we have seen some improvement in the time charter rates and we expect to do better in the current year. In terms of the bulk carriers as well the charter earnings have been flat. However, we hope the charter earnings will improve in the current year going forward.

Q: Can you give us some guidance in terms of the profitability of the company? When do you expect to turn into the black considering that you are currently loss-making?

A: In the current financial year on a standalone basis we hope to post a significantly improved performance. Our interest cost will be substantially lower this year as compared to last year. With better charter earnings we hope to push better results in the current year. Even on a consolidated basis last year we took some calls based on which we wrote off some one-time charges to the P&L account. Hopefully, we will see a better performance on a consolidated basis as well in the current year.

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