After having delivered a robust set of Q2 numbers, R K Goyal, managing director, Kalyani Steel, says the company can repeat the strong performance in the upcoming quarters if the iron ore prices stabilize.
The company’s net profit stood at Rs 22.8 crore versus Rs 11.8 crore year-on-year (YoY) and its sales came in at Rs 314.7 crore.
Below is the verbatim transcript of R K Goyal’s interview with CNBC-TV18\\'s Reema Tendulkar and Nigel D’Souza.
Ekta: A very strong earnings from you all. A revenue growth of 27 percent, your profits have jumped up 90 percent on year-on-year (Y-O-Y). Is the performance that we have seen in Q2 sustainable?
A: I am sure it will be sustainable but it is subject to the situation and pricing of coking coal and coke and iron ore. We definitely have advantage in terms of decreasing international prices of coke as well as iron ore however, we have very serious issues regarding the quality and the pricing of iron ore in India and in particular Karnataka. The way quality of iron ore is deteriorating, the way availability is going down it may have substantial impact on our earnings in future. Otherwise we are very well placed, we are much more competitive, we have done a lot of cost reduction in terms of our conversion cost, in terms of our finance cost and that has definitely helped us in strengthening our position and sustainability.
Nigel: You have repeatedly been telling us that the iron ore quality is not good and maybe availability is not good, but your margins just keep improving. Now you are at 13.1 percent that is the EBITDA margins I am talking about, can you do even better than this?
A: We have a very high emphasis on cost reduction and we are doing a lot of innovative things in our plant which has helped us in reducing our cost continuously and it is a continuous journey. We are trying to find out new and new ideas so that we are able to reduce our cost further and our efforts are continued in this direction.
Reema: So currently your margins are at 13 percent. By the end of FY15 what will be the exit rate on your margins?
A: As I mentioned one part is conversion cost which is internal which is controllable by us but other part is the raw material cost and quality. As we have very little control on the quality and availability of iron ore it is very difficult to commit that but we expect things to improve further.
Nigel: When was the last e-auction of iron ore? How much of quantity did you get and what prices did you but it at?
A: Now a days the landed price of iron ore in our plant is something around Rs 5,600 – Rs 5,700. We keep on buying continuously in almost every auction.
Nigel: So what is the inventory you are sitting on? How long will that last?
A: The inventory at any given point of time is one to one and half months which includes some in plant, some in transit, some which is yet to be lifted from the mines.
Reema: What aided the top line performance or the revenue performance this quarter? What were the key highlights of the quarter which enabled you all to post such a strong performance?
A: One basically is the reduction in cost, second is reduction in financial cost and the third part is do a provision for the depreciation basically because of the amendment in the company law which was subsequently announced as compared to what it was originally sometime in April.
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