Sesa Goa Ltd (Q3 FY13)

India Infoline News Service | Mumbai |

The company acquired the remaining 49% stake in Western Cluster Ltd, Liberia thereby increasing its shareholding to 100%. Expects production to start from Q4 FY14

CMP Rs182, Target Rs191, Upside 4.9%

  • Topline of Rs2.7bn was lower than our estimate of Rs3bn and declined 91% yoy on account of no iron ore production in Goa and Karnataka
  • Production of iron ore was completely halted in Goa and Karnataka as the company still awaits necessary clearances from the SC
  • Production of pig iron and met coke improved on a qoq basis while sales of pig iron were affected by unfavorable market conditions
  • CEC has approved Reclamation and Rehabilitation plan for company’s Karnataka mine with the production capacity of 2.29mtpa, management expects to resume mining in Karnataka subject to court’s approval
  • The company acquired the remaining 49% stake in Western Cluster Ltd, Liberia thereby increasing its shareholding to 100%. Expects production to start from Q4 FY14

Result table

(Rs mn) Q3 FY13 Q3 FY12 % yoy Q2 FY13 % qoq
Net sales 2,365 26,171 (91.0) 2,944 (19.7)
Raw material purchases and stores (1,531) (6,352) (75.9) (650) 135.8
Transportations costs (389) (2,563) (84.8) (842) (53.8)
Export duty - (4,485) (100.0) (95) (100.0)
Personnel costs (560) (638) (12.2) (643) (12.9)
Other overheads (938) (1,281) (26.8) (669) 40.2
Operating profit (1,053) 10,852 - 46 -
OPM (%) (44.5) 41.5 - 1.6 -
Depreciation (354) (263) 34.3 (334) 5.9
Interest (1,020) (730) 39.8 (817) 24.8
Other income 154 180 (14.4) 142 8.5
PBT (2,273) 10,039 - (963) 136.1
Tax 807 (2,564) - (351) -
Effective tax rate (%) 35.5 25.5   (36.4)  
Other prov/minority etc 6,690 1,219 449 4,644 44
Adjusted PAT 5,224 8,695 (39.9) 3,331 56.8
Adj. PAT margin (%) - 33.2 - 113.1 -
Extra ordinary items (257) (1,779) (86) 1,878 -
Reported PAT 4,967 6,915 (28.2) 5,209 (4.6)
Ann. EPS (Rs) 869 869 - 869 -
Source: Company, India Infoline Research

Volumes plunge due to regulatory restrictions
Sesa Goa’s revenue declined 91% on a yoy basis and 20% on a qoq basis to Rs2.36bn on account of regulatory restrictions in Karnataka and Goa. Iron ore production and sales remained suspended in Goa. The company managed to sell 0.03mn tons of iron ore inventory in Karnataka through court monitored e-auctions. Revenue was primarily driven by the sales of pig iron, met coke and power. Sales of pig iron declined 8% yoy from 68,020 tons to 62,258 tons due to unfavorable market conditions. Dumping of pig iron by RINL and NINL added a lot of pressure in the pig iron market leading to the company building up inventory. Production of pig iron increased by 29% yoy from to 82,869 tons and of met coke jumped 40% yoy to 90,664 tons, led by commissioning of the new capacities previous quarter. Sales of met coke improved 15% yoy from 68,931 tons to 79,542 tons. Power sales were boosted by acquisition of GEPL and commissioning of the new 30MW plant.

Sales volume and realisation
  Q3 FY13  Q2 FY13 % qoq Q3 FY12 % yoy
Sales (tons)          
Iron ore (mn tons) 0.03 0.20 (85) 5.04 (99.4)
Pig iron 62,000 73,000 (15.06) 68,000 (8.82)
           
Realisation (Rs/ton)          
Iron ore 6,890 4,627 48.92 4,743 45.27
Pig iron 29,376 29,560 (0.62) 29,929 (1.84)
Source: Company, India Infoline Research

Sesa Goa operating plunges
Sesa Goa registered a loss Rs1bn against a profit of Rs46mn in the previous quarter at the operating level due to no ion ore production in Karnataka and Goa. Total expenditure of the company increased 18% qoq mainly on account of higher raw material cost for the pig iron and met coke plant, which jumped 39% qoq to Rs2.5bn. Pig iron inventory buildup also led to a decline in operating profit. Total fixed costs for the company are Rs250mn per month of which 60% is dedicated to salaries. PAT declined 11.6% qoq from Rs1.3bn to Rs1.47bn while the share of profit from associates increased 44% from Rs4.65bn to Rs6.7bn. However, adjusted profit declined 5% qoq from Rs5.2bn to Rs4.97bn.

Cost analysis
Q3 FY13 Q3 FY12 chng yoy Q2 FY13 chng qoq
Raw material purchases and stores 64.7

***Note: This is a NSE Chart

 

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