Coal news and updates

While cement prices have increased by Rs 10 per bag in North East India, there has been little improvement in Bihar, Jharkhand and Bengal, says Sanjay Gupta, CEO of Star Ferro   . Mihir Jhaveri, cement analyst at Religare Capital Markets says, prices have improved in northern, western and central India but eastern India is seeing low prices due to high supply. Talking about the demand, Gupta says there has been 5 percent improvement in Bengal, but no growth in the Jharkhand region. He expects demand to improve from first quarter of FY17. 

Star Ferro has a capacity utilisation of 90 percent in the fourth quarter and will be around 75 percent for the full year, Gupta says. Gupta expects earnings before interest, tax, depreciation and amortization (EBITDA) to be around Rs 1,600 to Rs 1,700 per tonne. Below is the verbatim transcript of Sanjay Gupta & Mihir Jhaveri's interview with Nigel D'Souza and Reema Tendulkar on CNBC-TV18. Nigel: Your dealer checks suggest that prices have gone up in select parts of the country and also you have seen that in certain parts like the east, prices haven't moved higher. Jhaveri: The prices have inched up in north and the western and the central market whereas in the eastern market because of the supply been higher the prices have seen a drop. 

 

These three regions are where the prices have increased and particular northern market has seen a very good price increase over the last one-one-and-half months. Reema: No price increase in east, walk us through the demand situation, how much is the supply pressure and what will this mean in terms of your company's volume growth as well as the realisations in Q4? Gupta: In this quarter in north-east actually we have seen a price increase of approximately Rs 10, depending on various markets but I agree with Mihir when he say that on entire east, if you look at Bengal, Bihar and Jharkhand the prices have not gone up. 

We do till expect that may be in the latter half of this month we will still have some price increase going forward at least in Bihar and Bengal. In terms of demand, north-east demand - last month it has grown around 15 percent and on overall yearly basis it is around 7.5-8 percent. It is less than our expectation. We expect it to be around 9-10 percent and demand in Bengal, Bihar and Jharkhand; Bengal is 5 percent growth, Bihar has done little better but there is absolutely no growth in Jharkhand. So in these states the market growth is around 7 percent but we still expect that within March and maybe in the first quarter of next financial year, we will see some uptick in demand. Nigel: What about volume. I think that is the most encouraging part of your report. You are saying that volumes are likely to grow by around 9-10 percent. Is this only because of capacity addition or do you believe that in other parts of the country, there is demand that is coming back to the fore? Jhaveri: If you see January-February approximate of various big companies, they have shown double digit growth and aided by capacity expansion. Those who are having capacity expansion, they have grown even much better, for example Shree Cements has grown 30 percent plus, JK Lakshmi Cement (JKLC) would be 20-25 percent plus whereas the largecaps would be in the range of double digit. So if you see the trend, if that continues in March or so and that could continue given that some demand pick up has happened on the infrastructure side then you might grow by 8-9 percent which is a positive sign given we have seen a lull in the last many quarters where volume growth has not come in. Nigel: Could you tell us what your current capacity utilisation is and for the final quarter your EBITDA per tonne. What is it likely to come in at? Gupta: We accept that this quarter the capacity utilisation will be around 90 percent but we are expecting full year capacity around 75 percent. This quarter it will be around 90 percent and in terms of EBITDA, we are still saying that our EBITDA will be in the range of Rs 1,600-1,700 for the full year. This quarter is looking better than the last quarter. So we expect the full year EBITDA margin to be in that range only.

Source:  Money Control