Coking coal prices may impact margins: SAIL

Excerpts from CNBC-TV18’s exclusive interview with SK Roongta:

Q: The numbers are good overall. But we have seen pressure on the operating margins and on EBITDA. Prices were raised in the last three months. What has led to the pressure there?

A: In Q4, we made a substantial provision on account of wage revision and employee cost. We have a new wage revision with our employees, which has not yet been negotiated and settled. So, we thought that it is appropriate to make good provision on account of this possible wage settlement, so that we don’t have to account for it in the current year 2008-09. This has to some extent impacted our EBITDA margin.

Q: The price rise has been a concern and you have promised to hold back the prices for the next three months. Do you think you will be able to sustain the margins also?

A: With respect to the assurance of holding back the price for the next three months, we stand by it and will keep our prices firm for the next three months and not increase it.

There is a lot of pressure on input cost, especially coking coal, which has more than doubled as compared to last year. The higher cost of coking coal will get reflected in a few months time and will put pressure on our margins. That will be the real trigger for the major cost escalation.

We are taking a lot of internal action to contain the cost by increasing our production, productivity, reducing our energy and coke consumption, as well as going for high valued items so that we can protect our margins.

We have some carry forward quantity that we got from last year’s coal contracts. We will try our best to improve our internal efficiency to abjure as much cost as we can, without passing on the burden to the customer.