MMTC to focus in increasing volume of high-margin trade

MMTC Ltd has not been able to arrest the decline in profitability in 2010-11 even though provisional estimates suggest that its revenue soared by 49.5 per cent to Rs 67,500 crore.

Mr H.S. Mann, Chairman and MD of MMTC, told Business Line that this fiscal the management's focus would be on improving the bottom line and performance of the joint ventures, particularly Nilachal Ispat Nigam Ltd (NINL).

He did not, however, divulge the estimated PAT figure as the board of the company is yet to consider the annual results.

The country's largest two-way trading company's bulk minerals, metals including precious metals, coal and agro products fetch very low single digit margins.

“We are now trying to increase the volume of high-margin trade and control costs,” he added.

NINL's poor show

According to sources, a sharp drop in profitability of NINL in 2010-11 has not provided the expected buoyancy in MMTC's bottom line.

NINL, the largest pig iron maker of the country, may report a loss for 2010-11 against a profit of Rs 38 crore in 2009-10, Mr P.C. Sahu, Managing Director of NINL said. “Five-fold appreciation in cost of imported coal has been the crucial factor in increasing overall operating cost,” Mr Sahu said.

MMTC holds the 49.78 per cent controlling stake in unlisted NINL, which expects to begin production of steel billets in November. It also has iron ore mining lease in Orissa's Sundargarh and Keonjhar Districts with an estimated reserves of 110 million tonnes.

According to sources, MMTC's future profitability would largely depend on how it manages the NINL factor this fiscal. Under an agreement, procurement of NINL's raw materials, such as coal and manganese and sale of products, such as pig iron, coking coal and steel items in future, is the responsibility of MMTC at market-driven rates.

Coal mining

MMTC is also preparing to enter coal mining, primarily to cater to the needs of NINL. It has decided to outsource mining operation on its concession area in Gomia in Jharkhand (indicated reserve: 1,100 million tones). “In next two months, we would float a global tender for the mine development and operation contract for Gomia block,” Mr Mann said.

He said by next month a consultant would be appointed for preparing the tender document.

MMTC's Singapore-based subsidiary has commenced third-party trading. “This could be a significantly better trade options going forward as it provides margin between 15 and 20 per cent.”