Mr Rajiv Goel CFO of ISMT said that the company could now work on full capacity. Mr Goel saw that the next six month performance in line with last year. He added that “FY10 operating profit is expected to be over INR 100 crore.”
The company would benefit from the cost reduction in the second half of FY10.
Here is a verbatim transcript of an exclusive interview with Rajiv Goel on CNBC-TV18.
Q. We have got a big capacity expansion plan underway. How much of that can be executed this year and how much can that augment your revenues compared to last year?
A - As I speak to you I can tell you that capacity expansion will be fully implemented by this quarter itself because the only thing we are waiting for is the furnace and the furnace is also under commissioning right now. So we will have the full capacity available to us of 400,000 tonnes in Baramati Plant and about close to half a million tonne both the plants together. As the original plan was to ramp up of this capacity over a period of three to four years and lot of it has to be sold in international markets which for the last few months have not been doing well at all. Though we did very well last year on a whole in export market but for last nine months exports have been a drag. The good thing is that signs of revival have just started in international markets. Whatever we lost last six months is fine but for the next six months we should be able to whatever we did last year or better than that. That is as far as export market is concerned. As far as domestic market is concerned; in both the key markets, for the power sector market we are supplying tubes of boilers and the other market is for OCTG for oil exploration tubes. I think both have been doing very well. Last year also despite slump, post September these markets stood up quite well and compensated some of the export losses. This year is also happening and we think these markets will continue to grow at a healthy rate. As per capacity utilization we created large capacities but for us more than the capacity it’s the cost reduction which has contributed. the premium quality finishing mill which we installed will start contributing and has contribute last year itself in initial stages to cost reduction in terms of better input-output ratio, in saving the further processing of material because we are producing smaller tubes directly without further purchasing. But the real impact of that will come in the current year after we get the benefit of furnace in the second half. So that is where we expect substantial saving in cost, which in turn helps us create new markets. Now we can get to market which earlier we were not able to touch and that is the strategy when we put up PQF that was the major thing we are looking at to try and capture newer markets. Lot of work has been done in creating lot of new customers; even in this slump many new international customers were added.
Q. I believe you have also hiked your finished goods pricing, can you confirm that for us and how much the quantum of the hike has been?
A - The hike is because the raw material cost has gone up. the scrape which we were buying at USD 270 to USD 280 is no USD 330, then there is power increase in Maharashtra, oil price increase and so all together the cost increases their 2500 plus which translates to price of about USD 3000 per tonne plus and that is what we have asked at the starting point with steel level and then tube level it translates to a higher price of about USD 3,500 to USD 4,000 per tonne.
Q. From whatever you just spoke about the domestic and the export market- what do you think you will be able to close this year with because last year because of the FOREX loss, you profits got pegged down to just about INR 50 crore do you think this year you can get down to INR 100 crore plus profit after tax?
A - Last year as well our operating profit was at INR 100 crore plus level and current year we already had a profit, in the first quarter close to INR 25 crore and I think second half would be better and hopefully we don’t expect further mark to market loss and dollar not going back to beyond INR 50 crore, considering that it should be possible.
(Sourced from http://www.steelguru.com/news/index/2009/09/15/MTExNzUx/ISMT_sees_FY_10_profit_at_INR_100_crore_-_Mr_Rajiv_Goel.html)
Monday, September 14, 2009
ISMT sees FY 10 profit at INR 100 crore - Mr Rajiv Goel
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