Gujarat NRE Coke Net Profit Jumps 958%

Kolkata-based Gujarat NRE Coke (GNCL) has reported a whopping 958% rise in its net profit to Rs 20 crore for the December quarter of the current fiscal. Revenues grew by 57% to Rs 527 crore on a Year-on-Year (YoY) basis. The Company saw a twofold rise in its Coal and Coke business during the quarter under review. In the December quarter, last fiscal, it had reported revenues of Rs 245 crore in this segment which grew to Rs 496 crore this year. Revenues in the steel segment declined from 90.69 crore to RS 30.89 crore.

GNCL had commenced production from its mines in Australia in April 2012. It has been increasing its production from these mines which has helped the company perform well in the December quarter.  The merger of Bharat NRE Coke with the parent company during the quarter also helped in the betterment of its results. It had done so towards the end of the September quarter and the impact is obviously being felt now. BNCL has a met coke producing capacity of 0.32 million tonnes per annum (MTPA) at Dharwad in Karnataka. By merging BNCL, the total Met coke production capacity of GNCL has gone up to 1.25 MTPA.

In the first two quarters (Q1FY13 and Q2FY13), the company had reported a strong revenue growth due to the high production from mines in Australia. The production numbers as of yet are unknown, and hence drawing up a perfect conclusion on how the merger has actually helped the company isn’t becoming possible.

In FY12, the Coal and Coke business contributed to 75% of its revenues while the Steel business contributed to the remaining 25%. After the company commissioned its Australian coal mines, the revenue share of Coal and Coke business has been going up. In December quarter of 2012, 94% revenues came from the Coal and Coke business while 6% came from the Steel business. Going ahead, one can expect a further rise in the contribution of the coal and coke business.

Though revenues have increased during the quarter, EBITDA margins have declined by 513 basis points on a YoY basis. One of the reasons for this is, the inventory pile up in its steel segment. This is evident from a decline in the sales of steel without a corresponding decline in the cost of raw materials. On a quarter-on-quarter basis too, margins have fallen by 832 basis points which may remain a concern going ahead.

The company during the quarter issued Foreign Currency Convertible Debentures (FCCBs) worth USD 20 million (Rs 110 crore) with a coupon rate of 5.5%. These FCCBs are convertible into the equity shares at a price of Rs 22.50. If not converted, these will come up for redemption in October of 2017. It has also converted 4.5 crore of warrants in the equal no of equity shares of face value of Rs 10 hence the number of shares have also increased by 8.57%.

Its promoters have pledged 83.45% of their shares as per the latest shareholding pattern available. Its financial performance too, has not been very consistent over the last few years. The share price too has declined in the second half of CY12 from the level of Rs 26 in February 2012 to Rs 20 by December 2012. Despite the robust December quarter performance, we advice, you avoid this counter at least for now.