New facilities, expansions to boost volumes: Essar Ports

Essar Ports posted a five fold increase in its net profit for the September-December quarter while its total revenue rose to Rs 276.78 crore from Rs 190.27 crore in the year ago period.

Rajiv Agarwal, CEO and MD, Essar Ports expects the trend in revenue to continue going forward. He also anticipates volumes to increase in the coming quarters with new facilities and expansions on the anvil. He added that the utilization will be better in the coming quarter, and going forward, the utilization will go up.
"This year we expect to do about 33 million in Vadinar and which will go upto 40 million next year," he said. Below is the verbatim transcript of his comments. Also watch the accompanying video.  Q: Take us through the key highlights in terms of the numbers for Essar Ports?
A: This time, our income has gone up by about 45% during the quarter to about Rs 276 crore and EBITDA is up 68% at Rs 670 crore and the net profit is Rs 45 crore as against Rs 17 crore in the previous year.  All in all, I think this is the hived out part of Essar Shipping Ports and Logistics. Now, it is primarily the ports business, which in the last three years, has see n a lot of traction. In fact, we have had almost a 60% CAGR growth to reach at these levels this year. Q: What do you expect by way of revenue on a pro rata basis? Can we assume a Rs 300 crore revenue in the current quarter and the next as well?
A: Yes, I think the trend will be maintained, though we have seen a slowdown at Indian ports because of export duty on iron ore. Coal imports are also not moving as expected because of the issues in Indonesia. But we expect that volumes will hold on and I think we should be able to maintain and do slightly better in the coming quarter, and next year, with some of the new facilities coming up and the expansions which are taking place.
In fact, this quarter, we had the 10 million tonne steel plant at Hazira commissioned. The 18 million tonne refinery expansion has also been completed and the first unit of Salaya power plant of 600 megawatt has been commissioned. So these will begin to kickstart in the coming quarters.
In the first quarter of next year, we expect the iron ore terminal at Paradip to get started. So, that will start functioning with the start of the plant in Paradip, Orissa. So, all these things will keep increasing our numbers in a sustained manner. Q: There was some amount of operational difficulties or a shut down that took place at the Vadinar port in the previous quarter. What are the utilization levels that we could expect and what is the volume trajectory that we could expect going forward?
A: There is no operational difficulty. It is a normal process of shutdown for maintenance and the refinery was going through an expansion process.  That process has been completed; it was a 35 day shutdown and now the plant is working well and the terminal is working as well, so there was no issue as such. In fact, this quarter the utilization will be better, and going forward, the utilization will go up. So, this year we expect to do about 33 million in Vadinar and which will go upto 40 million next year. Q: What about realisations then?
A: Realisation for the company has gone up from about Rs 185 per tonne last year to about Rs 237 per tonne this year. So, realisation has also gone up by about 28%. Q: Will you be able to maintain these kinds of margins? This time you had some luck with respect to interest costs going lower as well as forex loss reversals. Would next quarter and the next year not have so many advantages?
A: In fact this year we have seen hardening of interest rates.  Our EBITDA margins are very strong, we are clocking at around 80% EBITDA margins. With the new projects coming up, interest cost will go up, but we will try to maintain that, but the EBITDA will also go up.