Sales and profits during the quarter ended March this year for Vedanta-controlled iron ore miner Sesa Goa slipped on account of lower volumes compared to a year ago.

Sales dipped by 23 per cent to Rs 2791 crore as the company sold 21 per cent lesser ore during the quarter.

The 5.2-million tonne of ore sold were largely from low-grade mines in Goa as a continued ban on exports from Karnataka kept utilisation rates at the more lucrative and high-grade A Narrain mines depressed. Operating profits declined by 53 per cent to Rs 98 crore.

But adjusting for forex gains made by the company during the last quarter would have resulted in an operating profit decline of around 46 per cent. The single biggest culprit in driving down profits was the doubling of export duty outgo to Rs 742 crore.

Export duties for the quarter accounted for 26 per cent of sales from a mere 10 per cent of sales a year ago. This was the result of a hike in duties undertaken by the Government earlier this year. Net profits were down by 52 per cent to Rs 696 crore.

For Sesa Goa, the problem is manifold. Firstly, mining policy at Goa remains in flux. Changes in this with regard to treatment of mining ‘waste' or a restriction on mining volumes could spell trouble for Sesa Goa.

In Karnataka, the company's plans to ramp up output at A Narrain have been disrupted by the ongoing ban on exports from the State. More stringent restrictions on mining iron ore in the State will put a spoke in the company's plans.

The new mining bill, which is on the anvil, could also see the Government take a bigger cut from every tonne of ore sold.

With such uncertainty and a pending merger with Sterlite on the cards, Sesa is going through quite a bit of rough weather. Little wonder markets merely nudged the stock up 1.8 per cent during today's trade.

(This article was published on April 25, 2012)
XThese are links to The Hindu Business Line suggested by Outbrain, which may or may not be relevant to the other content on this page. You can read Outbrain's privacy and cookie policy here.