Sesa Goa Result Update For Sept Quarter 2012
DSIJ Intelligence / 30 Oct 2012
Sesa Goa the biggest private iron ore mining company has recently announced its results for Sept quarter 2012. The numbers were quiet disappointing, its net sales have declined by 62% on YoY basis to Rs 285 Crore.
Sesa Goa the biggest private iron ore mining company has recently announced its results for Sept quarter 2012. The numbers were quiet disappointing, its net sales have declined by 62% on YoY basis to Rs 285 Crore. The decline on the topline was largely on back of the lower sales volume during the quarter. However, the PAT (excluding share of profit from associates) grew by 4,421.1% YoY to 58 crore mainly because of a low base effect and forex gains of Rs 188 crore against the forex loss of Rs 129 crore in the same period last year.
The sales volume of iron ore during the September quarter has fallen by almost 90 per cent on YoY basis to 0.2 million tonnes as compared with 1.6 million tonnes. And the sale volume for the first half (six months) has fallen by 47 per cent to 3.1 million tonnes, against that of 5.8 million tonnes in the same period last year.
| Sales Volume Sep Quarter 2012 (Million Tonne) | |||||
|---|---|---|---|---|---|
| Particulars | Sep Qtr 2012 | Sep Qtr 2011 | YoY | Jun Qtr 2012 | QoQ |
| Sales Volume Goa | 0.2 | 1.6 | -87.5 | 2.9 | -93.1 |
| Sales Volume Karnataka | 0.01 | 0.7 | -98.6 | 0.01 | |
The lower sales volume was on account of the ban on mining in Goa and in Karnataka. On 5 October 2012, the Supreme Court of India ordered a suspension on mining activities in Goa, including transportation of mined ore from mines or stockyards, and asked the Central Empowered committee (CEC) to file a preliminary report in four weeks. The fall in the production and the sales volume has impacted the financial performance of the company.
The EBITDA for the quarter stood at Rs 5.81 crore, which was down by 95.57% on YoY and 98.69% on QoQ basis. Moreover the EBITDA margin declined by 1464 bps on YoY and 2365 bps on QoQ basis mainly due to a decline in net sales and higher fixed costs.
Currently, Sesa Goa is not producing iron ore from its Karnataka mine due to a ban in the region. During July 2012, the Central Empowered Committee recommended an annual production capacity of 2.3mn tonne for Sesa Goa’s mine in Chitradurga, Karnataka. However, Sesa Goa is still awaiting an approval from the Supreme Court for resumption of mining.
In conclusion we believe Sesa Goa has been a major victim of the mining ban in the Goa and Karnataka which has dented the company's performance during the quarter. And we believe it will continue to face similar problems in the coming quarter too.
CEC officials would be visiting Goa in next week and survey some of the mines along with meeting state officials. In Karnataka the clearance from MoEF and mining plan from IBM are yet to be received. Coupled with renewal of mining lease, we believe this might take a longer time. On top of that the recent ban on the mining and transportation of ore in Goa by the Supreme Court poses a big risk to the company’s operations in the coming quarter and hence we ask investor's to stay away from the scrip from short term perspective.
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