Sesa Goa , a Vedanta Group company has cut its year-on-year volume growth projection for FY12 at 15% from 25% estimated earlier due to export ban in Karnataka and other issues, P.K Mukherjee, managing director, told analysts in a concall.
“This is the first time we are reversing our growth estimates as various restrictions-particularly export ban in Karnataka coupled with restrictions of logistics on public roads of Goa. Considering that circumstances will improve by the end of FY12, we have downgraded our volume growth,” said Mukherjee.
The Sesa Goa stock has been under pressure since March this year after the government levied 20% duty on all kinds of ore export.
“After enjoying a bull run in merchant mining for the past five years, Sesa Goa is fast realising the environment in India is not conducive for growth,” said an analyst who participated in the concall.
Meanwhile, Sesa Goa’s results were in line with analyst expectations who on aggregate had predicted a 30% decline in profits due to decline in production in Karnataka. The company in a statement said, their Q1 FY12 net profit decline 36% to Rs 841 crore and even sales dipped 13% at Rs 2,109 crore.
However, despite volume growth to be under pressure due to the export ban in Karnataka, Mukherjee seems confident on the growth potential on the company. “We have embarked upon an expansion plan to increase iron ore, pig iron and metallurgical coke capacity which shall be complete by 2013.”
Jagdish Agarwal from Emkay Global told moneycontrol.com, “My immediate concern for the company is how soon they will get state clearances on enhancing capacities to 50 million tones from the existing 25 million tones. “
He further said that even clarity on quantum of profit sharing in the new Mining Bill draft will largely drive the printability of mining industry overall. Globally, the demand and supply scenario for iron ore is expected to remain tight for the next two or three years. In the short term I maintain a neutral rating on the stock. Shares of the company were trading at Rs 276.80, down 0.45% at 11 hours on the Bombay Stock Exchange.
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