Tata Sponge reported a decline of 25 percent in total income to Rs 160.3 crore with EBITDA down 105 percent to Rs 1.7 crore. The company’s profits were down 79 percent to Rs 8.57 crore year-on-year.
DP Deshpande, managing director, Tata Sponge says the company’s poor Q4 numbers came on the back of sluggish steel market.
Below is the transcript of DP Deshpande's interview with Ekta Batra on CNBC-TV18.
Q: It has been disappointing in terms of a quarterly performance for you, what led to the weakness for you?
A: I think the general sluggishness in the steel market affected itself in the sponge iron prices. So Q4 prices are low. This is one reason. Of course we didn’t stop there. We also had our own share of operational issues which also added little difficulty to the performance and as a result of that the results don’t look as good as we expect.
Q: Can you tell us about the specific or individual factors that the company had to counter with which was maybe specific to your company that you spoke about?
A: The predominant factor was that the demand for sponge iron was low. Steel prices started coming down, pig iron prices started coming down so accordingly, the prices led a correction. and the iron ore cost although did start to drop towards the end of February and the month of March, we had sufficient amount of stock. Therefore, iron ore cost that we have to pay for were quite high. They are Rs 2,000 higher compared to the previous quarter’s figures. So if we look at these two factors together, they significantly pulled down the income of the company.
Q: If you had to give us some operational parameters and how much of volume fell this quarter as compared to the previous one?
A: Volume was 87,000 tonne roughly this quarter as against the similar period, Q4 of last year was 105,000 tonne. So normally in Q4 we should be producing very high but with the low demand, the low margins available also did not have a good encouragement for us.
The sales were 82,000 compared to 108,000 in the previous year. These are some of the results why the performance looks low.
Q: Did you have to take any voluntary shut downs or reduction in capacity simply because of this?
A: No, we did not do any voluntary cut back but we did choose to take shut downs of the equipment. So normal shut downs of equipments were slightly advanced.
Q: Are you seeing the same factors play on this quarter and hence maybe this quarter would be as weak as the previous quarter for you?
A: The demand continues to be poor. The prices continue to be poor and we think that there is no immediate reason trigger for it to change. That is one reason, unless certain amount of sentiment and bullishness in the steel market happens. However, the cost may not be as bad as it was in Q4 so we have a better performance looking forward to.
Q: Is there a risk that you might record a loss in the coming quarters?
A: I would not think so but I think Q4 performance was addition of the two performances, one is the poor market and the second is the high cost and low production. This factor would not repeat themselves.
Q: In terms of volumes would you manage to do what you did in Q4, higher or lower in this quarter, your internal estimate as yet?
A: In Q1 we are also planning to take a major shut down so therefore volumes would be same as we produced in Q4.
Q: When would this shut down be?
A: We have not fixed it up yet but I think it is a long shut down, it will happen sometime in Q1 and maybe run for a significant period in Q1 itself.
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