Sesa Goa Q2 net profit crashes 99%

Written by fe Bureau | Mumbai | Updated: Oct 26 2011, 08:43am hrs
Stung by the order of the Supreme Court decision to ban iron ore mining and direct sales in Karnataka, iron ore miner, Sesa Goa has reported a sharp decline of 99% in net profit for the quarter ended September 30. The consolidated net profit for the quarter stood at R1 crore as against R388 crore in the corresponding quarter last year.

Net sales for the quarter dropped by 13.8% to R790 crore as against R917 crore in the corresponding quarter last year.

The profit was impacted on account of decline in volumes, lower income from investments, higher interest cost and mark to market loss on foreign currency borrowings, the company said in its statement on why was there such a sharp decline in profits.

Interest costs for the company increased by more than three fold at R51.61 crore for the quarter as against R14.01 crore for the corresponding quarter last year.

Sesa Goa also informed the BSE that the results for the quarter are not indicative for the companys full year performance because of the seasonality of the business.

Before the Supreme Court order, Sesa Goa sold 0.71 million tonne of iron ore in the second quarter. In Goa, the company sold 0.83 million tonne of iron ore. The company produced less iron ore from Karnataka during the quarter producing only 1.12 million tonne as against 2.88 million tonne in the corresponding quarter last year. The production & sales volumes were adversely affected by low availability of iron ore from Karnataka and due to lower demand from foundries, said the company in a media statement.

During the quarter Sesa Goa also acquired a 51% stake in three iron ore assets in Liberia, with a potential iron ore resource of over 1 billion tonne. Sesa Goa paid $90 million for the acquisition.

Commenting on the adversities ahead for iron ore miners in the region, Platts senior editor, iron and steel, Annalisa Jefferies said, Right now the government-backed Shah Commission is in Goa and has started its investigation into illegal mining in the region, looking at land boundaries and checking that the correct royalties are applied to iron ore exports. Sesa Goas results were announced after the markets closed. Its share price closed at R210.90, marginally higher by 0.81% than the previous days close.