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Rising coking coal costs, exerting pressure on profit margins, has resulted in a 34 per cent drop in net profit for Steel Authority of India Ltd (SAIL) for the quarter ended December 2010. Net profit for the quarter stood at Rs 1,107 crore (Rs 1,675 crore).
The dip in net profit comes despite SAIL registering record Q3 sales of 3.25 million tonnes, a growth of 10.7 per cent over the corresponding quarter last year. The record sales figure resulted in record gross sales turnover in Q3 for SAIL. Gross sales turnover stood at Rs 12,276 crore a growth of 17.5 per cent over Rs 10,447 crore in the corresponding quarter last year.
Commenting on the company’s performance, SAIL Chairman, Mr C S Verma said, “There has been an uptrend in sales and profit compared to the preceding quarter, despite a higher cost push. I am confident that our SAIL team will face the challenges to maintain this improving trend.”
The company’s raw material costs for the quarter under review stood at Rs 5,262 crore, more than 37 per cent higher than Rs 3,823 crore in the corresponding quarter last year.
“There has been an adverse impact on profit mainly because of coking coal prices. In this quarter we had to buy coking coal at $205 per tonne as compared to $128 per tonne in the corresponding quarter last year. But we took some steps to negate the rising input costs which helped us keep in check the adverse impact on our profits,” said Mr Verma.
To partially neutralise the cost push, SAIL stepped up its production to record highest ever Q3 hot metal production at 3.96 million tonnes, 12 per cent higher than Q2 and 4 per cent higher than the corresponding quarter last year. Production of crude steel stood at 3.7 million tonnes while saleable steel production at 3.33 million tonnes also reported a strong growth.
SAIL incurred a capital expenditure of Rs 2,699 crore during Q3, taking the total outgo for this fiscal up to Rs 8,002 crore. During the quarter, the company completed installation of guillotine shear in the plate mill of Bhilai Steel Plant, coal dust injection system in Blast Furnaces 2 & 3 at Bokaro Steel Plant and a 700 tpd Oxygen Plant at Rourkela Steel Plant amongst others.
The SAIL Board has approved interim dividend for its shareholders at 12 per cent of the company’s paid-up capital amounting to Rs 495.65 crore.
Follow-on Public Offer
The SAIL Chairman also added that the company would be filing its draft red-herring prospectus in January for the follow-on public offer (FPO). “We will be filing the DRHP in January and the FPO should hit the market in the second week of February depending on market conditions,” said Mr Verma.
On the likelihood of SAIL opening steel plants overseas, Mr Verma said, “We are evaluating opportunities in various countries, not just South Africa. If the government of those countries can provide us with the adequate raw materials and land we would like to open a small steel plant.
SAIL announced the result after the markets closed but the company’s scrip closed 2.26 per cent lower at Rs 172.90 on the BSE.
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