A 15 percent fall in realizations led to Tata Sponge Iron logging a 75 percent fall in second quarter profit to Rs 5.75 crore but MD DP Deshpande says he does not expect the company to clock a loss in the third quarter.
"Our realizations have fallen but costs have fallen too though realizations have fallen more," he told CNBC-TV18, after the company declared its earnings. "But that is now balancing out."
Deshpande also spoke about the company's Rs 180-crore investment into a coal block that was cancelled by the Supreme Court last year and whether he expects to recover some of that money.
Below is the verbatim transcript of DP Deshpande’s interview with Latha Venkatesh and Sonia Shenoy.
Sonia: How much did your sales volumes and realisations fall this time?
A: We had two issues primarily. We had production volume coming down in our own plant, one issue. Second is, we managed to have sales quite alright because we also tried to get the deficit production manufactured in other plants. So, sales volumes were alright, but the production volume in our plant was low. This was one problem.
Second problem was the prices had significantly dropped compared with previous quarter. There is almost 15 percent drop in the prices compared to the previous quarter. So, two factors put together, we actually put up a disappointing result.
Latha: You said your sales volume fell by 15 percent?
A: The production came down from 83,000 tonne to 67,000 tonne, but we managed to get another 21,000 tonne of production done is somebody else’s plant. So, therefore our total sales were 98,000 tonne.
Latha: You said that your production fell because one of your kilns had shut down in May. When will it restart? What is your second half estimate of volume?
A: Second half, volumes will be bullish because we have now all equipments in a good working condition, revamped conditions and shutdowns have been finished. So, we should have, in my opinion, close to between 95,000 to 100,000 tonne of production in both the quarters which are following.
Sonia: You mentioned the prices have fallen. I did not get the exact number how much have the sponge iron price fallen this quarter and what is the expectation in the second half of the year?
A: In Q1 we had a realisation which was around Rs 16,500. It has fallen to Rs 14,300. So, about Rs 2,200, about 12-13 percent drop in realisation.
For entire interview, watch accompanying video.
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