Tata Sponge reports 25.5% yoy decline in net profit for Q3FY19

Higher raw material costs impacted the company's profitability

Jan 13, 2019 05:01 IST India Infoline News Service

Tata Sponge Iron Ltd (TSIL) reported a significant erosion in EBITDA margins despite strong revenue growth in Q3FY19. Revenue in the quarter grew 21.6% yoy to Rs261cr. EBITDA stood at Rs30.4cr, down 36.9% yoy. EBIDTA margin fell 1,080bps yoy to 11.6%, while net profit stood at Rs26.8cr, down 25.5% yoy.

Q3FY19 Q3FY18 Q2FY19 yoy qoq
Revenue 261 214 216 21.6% 20.6%
EBITDA 30.4 48.1 29.81 -36.9% 1.8%
EBITDA Margin 11.6% 22.4% 13.8%  (1,080 bps)    (215 bps)
PAT 26.8 36 24.4 -25.5% 9.9%
  • EBITDA margin erosion for Q3FY19 is due to a significant rise in raw material cost. Gross margin for the quarter fell 1,092bps yoy due to the rise in raw material costs.
  • Segmental revenue for the quarter stood at Rs248cr (up 24.4% yoy) for the sponge iron segment and Rs17cr (down 16.3% yoy) for the power segment.
  • Segmental EBIT for the quarter stood at Rs15cr (down 54.3% yoy) for the sponge iron segment. The EBIT for the power segment stood at Rs12.7cr (up 0.8% yoy) for the quarter.
  • The company announced a major change to its Board of Directors as part of its plan to integrate the Usha Martin acquisition into TSIL.
    • AM Mishra has stepped down as Chairman and would be replaced by TV Narendran, who is currently the Global CEO and MD of Tata Steel. R Ranganath, a Director, would also be resigning due to other engagements.
    • New members of the Board include Koushik Chatterjee as an Additional (Non-Executive) Director, Dr. Sougata Ray as an Additional (Independent) Director, and Bimlendra Jha as an Additional (Non-Executive) Director of the company.

Result Comment
Tata Sponge reported a weak set of numbers as raw material costs (iron ore and coal) remained relatively firm. However, sponge iron prices have fallen 13% since the start of Q3FY19. Prices are likely to pick up in Q4 once seasonal demand improves. Nevertheless, the slowdown in the Chinese economy is likely to keep metal prices soft going forward.

Tata Sponge Iron Ltd share price ended at Rs815, down Rs17.6, or 2.11%, from its previous close of Rs832.60 on the BSE. The scrip opened at Rs833.80 and touched a high and low of Rs836.55 and Rs809.50, respectively. The current market cap of the company is Rs1,261.57cr.

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