The country?s largest steel manufacturer, Steel Authority of India Ltd (SAIL), on Wednesday posted a 99% jump in net profit at Rs 1,676 crore for the quarter ended December 31, 2009, against Rs 843 crore in the corresponding period of the previous fiscal. The strong performance during the same period of last year was due to the low base effect and lower cost of imported coking coal, growth in sales and increased share of value added steel in its total production.
Steel demand had started declining since September 2009, causing a drop in prices and lower realisation for companies leading to depressed earnings during the same quarter last year.
The company?s board also approved payment of interim dividend at 16% of its paid-up capital, amounting to Rs 660 crore against 13% interim dividend paid last year.
During the period, SAIL?s net turnover was at Rs 9,697 crore, up 11% from Rs 8,724 crore in the same period of the previous year. Expenditure on account of raw material consumption reduced by around 35% to touch Rs 3,823 crore from Rs 5,880 crore even as input costs other than imported coal continued to escalate with higher royalty on iron ore and increased cost of ferro-alloys, zinc and aluminium. Employee cost of the company declined to Rs 1,571 crore from Rs 1,746 crore in the similar quarter last year.
However, an overall weak market saw the company?s shares closing 3.1 % lower at Rs 216.35 on the Bombay Stock Exchange.
?Apart from lower cost of imported coal and growth in sales, other factors which contributed to the doubling of profit during the quarter were increase in production of value-added steel by 25%, improved techno-economic parameters and several other cost-efficiency measures,? the company said in a statement.
S K Roongta, chairman, SAIL said that he expected steel prices to remain stable in the near future. ?Prices should remain stable at this level unless input costs see a significant rise following fresh negotiations for long-term contracts in iron ore and coking coal, due in this April,? he said. The steel companies have increased prices in the past two months, especially for flat products on the back of higher demand from the automobile sector, which has been witnessing a resurgence in sales. SAIL hopes to improve output and sales in the fourth quarter as demand from automobile and construction sectors picks up.
Steel prices were lower by 12 % from a year ago but the scenario may change because of rising input costs and increase in international prices that have gone up between $50 to $100 in the past 6-8 weeks.
?But we have to reckon the fact that overall capacity utilisation is still at lower levels (globally). Increased demand will be met through our increased supplies,? Roongta said.
The company said its capital expenditure grew 114%, to touch Rs 2,793 in the third quarter compared to Rs 1,306 crore in the same quarter last year.