52-WEEK FLOP: MOIL ::Business Line

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Shares of manganese producer MOIL have shed 52 per cent over the last one year as a sharp drop in manganese prices dented realisations and profits. The first half of FY-12 saw net sales dip by 28 per cent as manganese prices fell 25-40 per cent over the past year.

Rising employee costs compounded troubles with net profits taking a hit of 36 per cent. Operating margins, as a result, contracted sharply to 51 per cent in the first half of the current fiscal from the 70 per cent in the year-ago period.

Manganese prices have come under immense pressure due to aggressive capacity additions in geographies such as South Africa and Australia. The supply glut, as well as an expected addition of more mines in Africa over the next two years, kept prices on a tight leash. Prices have also remained in check due to the reportedly high levels of inventory in Chinese ports. India has also seen private miners add significant capacity, piling up the pressure on MOIL.

However, working in favour of low-cost producers such as MOIL, is the fact that prices are fast approaching levels at which several high-cost producers in Africa could slip into losses. This may spark off a shutdown in higher cost mines and thus provide support to manganese realisations.