Mumbai, Oct 21: Higher volumes sales have failed to prop up Tata Steel's bottomline in the first half of the current fiscal, which has slipped by 6.37 per cent to Rs 90.18 crore from Rs 96.32 crore in the same period last year.The company's bottomline was hit primarily due to lower sales realisation, higher interest payout which jumped 19 per cent, and a 14.1 per cent increase in depreciation.
A senior Tata Steel official told The Financial Express: "Despite the minor increase in prices in the second quarter, average sales realisation has been lower but indications are that prices will improve. We hope to keep interest charges in control in the second half."
The company's scrip dipped on the BSE from Rs 154.50 to Rs 147.50. Tata Steel's net sales were 11.26 per cent higher at Rs 3,134 crore compared with Rs 2,817.53 crore during the April-September period 1998. Production during the first six months was 1,588,279 tonnes and sales 1,493.862 tonnes, which were up 8 per cent.
The outgo on account of the Employee Separation Scheme to employees were lower at Rs 64.53 crore against Rs 78.08 crore, due to change in the accounting policy of amortising it over 10 years instead of five years.Company officials said that among the non-core businesses, the contribution of the tubes business to the bottomline continued to be negative, while the bearings division has roughly broken even.
INSIGHT:
Margins to remain under pressure
A positive sales and production growth has failed to prop up Tisco's bottomline, which slipped from Rs 96.32 crore to Rs 90.18 crore. The drop could have been higher had not the company changed the amortisation period for VRS expenses from five to ten years. Imposition of floor prices on steel to curb imports has failed to improve the company's margin, which has remained stagnant. Higher interest cost has added to the company's woes.
However, in the second half the company might be able to post a better year-on-year basis as the base in 1998-99 was lower. Further, reduction in interest cost as a result of utilising proceeds of sale of the cement unit to retire high cost debt is also likely to help. However, as far as improvement in margins is concerned there seems to be no respite, specially after a hike in diesel price.
-- Shishir Asthana
Copyright © 1999 Indian Express Newspapers (Bombay) Ltd.