Improved operational performance pushes Sesa Goa up 6%

Following the declaration of the company’s better than expected results on Wednesday and buoyed by higher volumes, Sesa Goa is trading six percent higher today at Rs 212.

This despite most of its figures ending lower. Its consolidated net profit came at Rs 691.5 crore for the quarter ended 31 December 2011, compared to Rs 1,065 crore for the quarter ended 31 December 2010. Its net profit was down 35 percent after accounting for forex losses of Rs 177 crore. and its operating profits were also down 27 percent compared to the same quarter last year. The only positive in its numbers being its total income, which was Rs 2,635 crore for Q3 against Rs 2,376 crore over the same periodyear on year.

So why then did the stock gained so much in a day? First, its operational performance was much better than expected. Its average realisations from iron ore was Rs 4,743 per tonne, up 9 percent since last year and down 11 percent from last quarter. According to aMorgan Stanley report released on 26 January, the improvement in Sesa Goa’s stock was due to improvement in its iron ore grade, while the decline from last quarter was due to a decline in benchmark iron ore pricing.

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[caption id=“attachment_195634” align=“alignleft” width=“380” caption=“Iron-ore producer Sesa Goa, controlled by Vedanta, Sesa Goa is trading six percent higher today at Rs 212. Reuters”]  [/caption]

Its consolidated net sales also rose 16.4 percent from last year mainly due to liquidation of its inventories in Goa and Karnataka.

The company took a huge beating in export duty - which was suddenly raised to 30 percent in December - which stood at Rs 450 crore, against Rs 120 crore in the same quarter last year.

The ban on iron ore mining in most parts of Karnataka and the rise on export duty had come as bad news for the sector.

The stock touched a 30 month low of Rs 148.30 on December 20. And even considering today’s 6 percent rise its price, the stock has fallen 25 percent in the last 6 months.