The Hindu Business Line : Electrosteel Castings net profit dips on higher input costs

Kolkata, Jan. 24 Electrosteel Castings Ltd, for the quarter ended December 31, 2007, has reported a sharp drop in profit after tax at Rs 14 crore, from the Rs 29 crore achieved during the corresponding quarter of the previous fiscal. Net sales for the said quarter have climbed to Rs 344 crore (Rs 317 crore), registering an increase of 8 per cent. Other income has jumped to Rs 19.85 crore (Rs 16 crore), on sale of certain long term investments.

According to a statement issued by the company here today, (announcing the signing of the much awaited lease for the captive coal mine already allotted to the company,) a steep increase in prices of vital raw materials like iron ore and coke and hike in shipping freight rates have reduced the profits substantially.

It is pointed out that both sales and profitability of the company for the quarter under review were affected owing to wide foreign exchange fluctuations and also transactions (hedge deals). This has resulted in losses to the extent of Rs 10.45 crore (on forex swings) and Rs 16.66 crore on transactions including Rs 15.90 crore on conversion of ZCCBs (Zero Coupon Convertible Bonds) issued in the previous year into ECL’s share capital.

The company has been allotted a coal block in the Jharia coalfield area at Parbatpur near Bokaro in Jharkhand, with a coal reserve of approximately 200 million tonnes of prime coking coal.

According to the ECL top brass, land required for operation of the mine has already been acquired, and development work is expected to commence immediately. And with this, the company expects to reduce the cost of production of its D.I. pipes produced in the Khardah factory here. Coal will be transported by rail, for which a railway siding is being developed close to the mine.

The captive coal source, it is felt, will ensure that the company gets coking coal at lower cost and avoid the impact of demand-supply volatility in the market. The benefit of the captive mine may start accruing from 2008-09, sources said.

The ECL stock today closed lower in the BSE at Rs 67.25, after touching a high of Rs 74.1 during intra-day trading. (The Rs 10 face value share of ECL was sub-divided into equity shares of face value of Re 1 each on and from September 25, 2007.)

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