Net realization outlook not very strong: Tata Metaliks

Nigel: What is the big reason that we have seen such a big margin improvement? Your ductile business has done well.

A: Ductile iron business has done well; pig iron business has also done well. Pig iron business one of the most important raw materials which is around 55 percent of our cost base is coke. There has been a substantial reduction in the price of coke. There has been a reduction in international prices themselves and that is reflected in the domestic market also.

However, the iron ore prices have gone up specially in the eastern region and those prices have gone up continuously since beginning of this financial year, continued in Q2 as well. But we have been able to hold on to our net realisations.

Nigel: I have been speaking to various users of coke and they have been indicating that coke prices now have bottomed out and may be we could see some uptick from here. If that happens will you struggle to hold on to these margins?

A: Yes absolutely if coke prices go up and there is a possibility that it goes up a bit.

Nigel: In the last one month has there been any moving around of coke prices?

A: Little bit, may be just USD 3-4.

Nigel: If I look at the ductile business on a half yearly basis that is where the big jump is coming in terms of revenue as well as at an EBIT margin level. Could you take us through that particular business, could we see a further rise?

A: Yes there has been a substantial improvement in that business. There is considerable efficiency improvements that we have brought in with respect to cost and also we have chosen some select markets where we get better realisations that is why our performance there has improved.

Menaka: Could you offer some commentary on what your outlook is like for growth and profitability in the quarters to come in this fiscal?

A: Fact is the markets really haven’t been looking up, there is an overall stagnancy in the market with respect to absorption of these commodities and I do not see a very strong outlook going forward as far as net realisations are concerned. This is also stemming from the fact that the commodity prices are also more or less stagnant and coke has probably bottomed out and looks like it will remain around that number.

The iron ore prices going up is an issue of the eastern part of the country only and therefore there is a bit of a squeeze that we are facing as far as iron ore prices go, the market is not absorbing that. So going forward I do not see that we will be able to sustain these kinds of margins. It will be good but not as good as the last two quarters have been. And the demand is weak as well.