Tuesday, August 10, 2010

Rising raw material prices affected Monnet Ispat & Energy profit margin

Monnet Ispat & Energy, the leading sponge Iron manufacturer of the country, released its first quarter financial result for FY 2010-2011. The company registered a net profit of Rs.72.71 crore, an 18.72 percent rise against Rs.61.24 crore in the same period last year.

Net sales stood at Rs.420.38 crore against Rs.356.15 crore at the same time last year. In July, Monnet sold 12.5 percent stake in its subsidiary, Monnet Power Company, to US-Based Blackstone Group for Rs.2.75 billion.

Sandeep Jajodia, Executive VC & MD, Monnet Ispat & Energy said that profit margin was under strain due to the high cost of iron ore and coal prices from January to March. In April, prices of steel came down and in the current quarter, prices of steel declined about 12 percent but prices of raw materials did not decline.

In an interview with CNBC-TV18, Mr. Jajodia said that his company had done about 15% of 12-13% of net margin and it could have done better as the production volume was better and cost was lower but high prices of raw materials dented their profit margin.

He does not expect the volumes to go up in July-September quarters and all the plants are currently going through “a statutory shut down from plant to plant.”

Meanwhile, the Environment Ministry introduced some new norms which the companies are required to comply within September 30, 2010 which would affect the company’s production but there will be a huge improvement in sales.

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