Although realisations in the pig iron business are under pressure, lower coke prices have provided some support, says Sanjiv Paul, Managing Director at Tata Metaliks in an interview to CNBC-TV18, post the company’s thrird quarter results announcement.
Paul said, the company hopes that the spreads, that have narrowed down significantly, remain steady if not improve in the coming quarters, adding “as long as the coke prices remain where they are, business will survive.”
On his outlook on pig iron business for FY17, Paul said he does not see any specific triggers in market or economy hinting any improvement in the near term.
He highlighted that in the ductile iron pipe business, although liquidity is tight and margins might narrow down further, the demand is reasonably good and volumes will help keep the business afloat. the company has an order backlog of little over a year, he said.
Overall debt of the company has also come down to Rs 440 crore currently, compared to Rs 750 crore about 2 years ago, due to steady financial performance during the period, Paul pointed out.Below is the transcript of Sanjiv Paul’s interview with Nigel D’souza on CNBC-TV18.Q: The numbers look quite good, same old story playing out, pig iron business struggling a tad bit, while we are seeing your pipe business do quite well. Let us focus on the pig iron business first. We saw a bit of a dip, realisations, how have they been and how are they likely to be going ahead. And also, tell us, is there any benefit coming in from the lower coke prices or is that totally been wiped away from the lower realisations.A: Yes, the results have been a bit steady, and pig iron business actually, pig iron realisations crashed, prices came down steeply last quarter, but the lower coke prices surely helped and we are hoping that the spread, which has narrowed down a tad bit, will remain steady going forward and the business will not sink under industry-wide. But yes, realisations have been extremely low and the situation is worrisome. Hopefully, we did see a small spike in the last 15 days going up, but that did not last long and for the last one year, pig-iron prices have seen a continuous decline.Q: But, are things looking up? Do you believe that pig iron realisations have bottomed out at these levels? Do you think Q4 can be better and in fact, maybe FY17 can see a bit of an upmove from these levels?A: I do not see any triggers in the markets, in the economy to say things will be any different than what they have been so far. But, as long as coke prices remain where they are, I think, the business will survive.Q: Then, give us some clarity on your ductile iron pipe business; that has been doing quite well, steady performance coming in on margins as well. Can it get any better from here? Are you seeing enough demand coming from there, because that really is the business that is supporting your overall consolidated entity?A: In the ductile iron pipe business, the orders are slightly longish. What we are serving now are orders that we took maybe nine months ago. But, just now the margins have narrowed down. The margins have become extremely low just now and as we move forward, you will see the spread actually narrowing down. But, there is demand. There is demand in the market although liquidity is a bit tight, there is demand in the market and it is volumes that will help us stay afloat on the ductile iron pipe business.Q: Talking about that part of the business, what is the total outstanding orders and for how many more months do you have orders?A: We have a one year order load or slightly more, we would have. And the realisations should be fine at current costs.Q: Coming down to below your operational performance, we are seeing finance cost, they have come down by close to around 15 percent, your tax rate as well has come in lower and that is what has really boosted the bottomline though your operational performance itself was quite good. Could you give us some details on that?A: Our overall debt has come down because of the steady operational performance, steady financial performance in the last 2-2.5 years and the tax rate which is at around 14 percent compared to 18 percent last quarter is primarily because we are in March and there are some adjustments that are allowed, the losses of the previous year are unabsorbed, depreciation we are allowed to take credit off, so that is what has reduced the effective tax rate.Q: You said your debt has come down. How much has it come down by?A: We are currently at around Rs 440 crore odd compared to maybe Rs 700-750 crore plus 2-2.5 years ago.
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