Moneycontrol
Last Updated : Jan 18, 2018 04:21 PM IST | Source: CNBC-TV18

On track to meet FY18 sales guidance; new long-steel product plant likely: Tata Sponge

The company is looking at setting up a long-steel product division for which they have the necessary land, and some infrastructure is readily available on site, said Sanjay Pattnaik, MD, Tata Sponge.

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Tata Sponge Iron reported an over three-fold jump in its consolidated net profit at Rs 36 crore for the December 2017 quarter. Its revenue from sponge iron segment rose to Rs 199.30 crore from Rs 145.56 crore.

Talking about the company’s third quarter performance and the outlook going forward, Sanjay Pattnaik, MD, Tata Sponge said the company was on track to meet their FY18 sales guidance of 4.1 lakh tonnes.

He said for the third quarter they had volume growth of 22 percent and sales growth of 25 percent. The Q3FY18 sales volumes were at 1.09 lakh tonnes.

He said the company was also looking at setting up a long-steel product division for which they have the necessary land and some infrastructure is readily available on site. They also have board approval for applying for environment clearance. It is work in progress.

The margins for the company also expanded in Q3 to 22.4 percent versus 6.85 percent for the same quarter last fiscal.

The coal prices have gone up 10-12 percent and the company has had some logistic problems, said Pattnaik, adding that they have been trying to source coal from far of ports like Vizag etc and not Paradip, which has added to their input costs.

However, the demand for sponge iron is quite strong and so the company would be able to absorb these increase in costs, said Pattnaik, adding that they would strive to control the increased costs.

The current cash balance on the books is around Rs 800 crore, said Pattnaik.

Below is the verbatim transcript of the interview.

Latha: Can you give us the breakup between how much was the volume growth and how much was the realisation growth in your 50 percent revenue?

A: Yes, it has been excellent quarter. We had recorded 22 percent volume growth and sales growth of 25 percent and supported by this the NR also has increased in the market place so therefore we have posted this good number.

Sonia: Are you on track to meet your sales volumes guidance of 4,10,000 for FY18?

A: Very much on track. I am very confident that we will achieve that.

Latha: Can you give that number again how much was volume and how much was realisation?

A: From the realisation part I think there was about Rs 500 per tonne increase and the volume was more because from the last quarter we recorded something like from 89,000 this last quarter it was 109,000. So maximum came from the volume growth.

Anuj: Good going of course for your company and you, your cash levels are going up as a result of that. If you could give us the level right now and any use of that cash?

A: We are in discussion for putting up a long product steel plant and we have got our board’s approval for applying for the environment clearance which is work in progress, we are discussing and finalising the process route, the asset configuration, the size of the plant and the product mix. So it is work in progress and I would think that once it is finalised and all then we should be trying to put up a steel plant.

Sonia: By when would that happen?

A: As I said it is still work in progress. It is being discussed and one of the advantage is that we have land, we have some of the infrastructure readily available at our existing site so therefore we are a debt free company we had surplus cash and all that and therefore I think we are in a positon to execute that but the options are many and it is still being discussed. Once it is finalised you will all come to know about it.

Latha: I just wanted to know about margins, it is fairly decent growth that you have seen in margins in your third quarter but then now the coal price spike has come what is the impact of coal basically? How much has the price gone up for you?

A: Coal price has gone up, it has increased by 10-12 percent and more than the international price going up we are also facing a lot of logistic challenges because of shortage of wagons and therefore we are trying to get coal from not our nearest port Paradip. We are now trying to source it from Gangavaram, from Vizag so this also has added to our input cost.

But I would imagine that since there is a demand pool now for sponge iron and the demand is picking up so we would be able to absorb this increase cost. Of course we need to be careful and try to control that and I think the NR is going to be fairly strong in quarter four.

Sonia: Just wanted to come back to the question on utilisation of your cash, what is your cash balance on the books now?

A: Current cash balance on the books is about close to Rs 800 crore.
First Published on Jan 18, 2018 11:19 am
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