The country?s largest steel maker, Steel Authority of India (Sail), faced the impact of a subdued market as its net profit during the October-December quarter slipped 23% to fall below analyst estimates at R484 crore. In the same quarter last year, it had a net profit of R632 crore.
The steelmaker?s net sales grew only 1% to R11,801 crore from R11,686 crore in the same quarter last year, despite a 5% increase in sales volumes. This was because sales fetched an average of R35,168 a tonne, which was 6% less than the same quarter last year.
?Net sales realisation was down because the market was weak,? Sail chairman CS Verma said. ?My assessment is that the worst is over.?
Steel prices fell around 5% in the last quarter due to weak sales of cars and homes. The company said in a statement that the increase in royalty of raw materials also impacted the profitability.
In April, the government increased royalties on coal, which raised the prices of fuel used by Sail to generate electricity for making steel. This resulted in Sail?s total expenses going up 4% y-o-y to R9,936 crore.
Despite the depressed market conditions, Verma remained bullish about the industry?s prospects.
?Not a single steel company has curtailed its capital expenditure,? said Verma. ?Sail is doing well in the topline and we have had to reduce prices which has impacted profitability because if we didn?t do so then we would be overrun by Chinese imports.?
?Our industry is doing well but we cannot be insulated from the global conditions,? he added. Commenting on future projects, Verma said that the company expects Fertilizer Corporation of India to come out of Board for Industrial and Financial Reconstruction in the next two to three months. This would enable Sail to take possession of FCI?s plant in Sindri in Jharkhand.
On Tuesday, Sail?s share closed 0.37% higher at R81.20.