New Delhi: Steel Authority of India Ltd (SAIL), the country’s largest domestic steel producer, is optimistic about demand prospects after beating market estimates with a 3% rise in quarterly profit.
The state-run steelmaker posted a 12% jump in quarterly sales, mainly helped by higher prices in India’s fast growing steel market. But high raw material costs and losses due to foreign exchange fluctuations whittled down the gains.
“India is a demand centre ... the outlook is fairly positive,” SAIL chairman C.S. Verma told reporters on Tuesday.
Global crude steel output grew at a slower pace in 2011, and demand this year has been squeezed by the euro zone debt crisis and tight credit conditions in China, the world’s biggest steel consumer and producer.
Steel demand in India has also suffered over the past year as growth in Asia’s third-largest economy slows because of the Reserve Bank of India’s inflation-fighting campaign and government gridlock, but still remains in the 5 to 7% growth range.
SAIL said its net profit in January-March, its fiscal fourth quarter, rose to Rs1,577 crore ($284 million) from Rs1,531 crore a year earlier. Net sales rose to Rs13,397 crore from Rs11,943 crore a year earlier.
Analysts had estimated on average a net profit of Rs1,090 crore for the quarter on net sales of Rs12,780 crore.
The company, which imports 75% of its coking coal requirement, said higher coking coal prices pushed up costs by Rs4000 crore over the entire fiscal year. A depreciating rupee, which fell 12.3% in the 2011-12 fiscal year, added another Rs900 crore in costs.
SAIL did not separately disclose the impact for the quarter.
Earlier this month, Tata Steel, the world’s No.7 steelmaker, posted worse-than-expected quarterly numbers, while JSW Steel said an interim ban on iron ore mining in Karnataka cut profits by 10%.
SAIL, with annual capacity of about 14 million tonnes, is the largest steel producer in India, but lags Tata Steel’s global capacity of about 28 million tonnes.
The steelmaker is in the process of raising capacity to 19 million tonnes by March 2014, and plans to spend Rs14,500 crore on expansion projects during the current fiscal year.
Shares in the company, valued at nearly $7 billion, have risen 14% so far in 2012, outperforming a 6.4% increase in the main stock index. On Tuesday, the stock closed down 0.4% at Rs93.10 in a flat Mumbai stock market.