New Delhi: Steel Authority of India Ltd hopes to improve output and sales in the March quarter as demand from automobile and construction sectors picks up, after the company posted its first quarterly profit rise in five.
State-run SAIL, the largest producer of the alloy in India, on Wednesday beat market forecasts with a doubling of profit in its third quarter ended December as sales volumes jumped and input costs eased.
“The surprise is the fall in input costs. Q4 is generally the strongest. We need to see if this strong operating performance can be sustained,” said Paresh Jain, analyst at Angel Stock Broking.
SAIL reported a 25% rise in sales volumes to 2.9 million tonnes in the last quarter, while costs of imported coking coal, a key raw material, fell.
“There is generally good demand. We expect to improve our production and sales during the current quarter,” chairman S.K. Roongta told reporters.
Steel prices were lower by 12% from a year ago, but these are expected to climb 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 to the fact that overall capacity utilisation (globally) is still at lower levels (globally). Increased demand will be met out of increased supplies,” Roongta said. Global steel production fell 8% in 2009, as demand from key industries shrank amidst a global economic downturn. But as macroeconomic data improves and inventories deplete, demand is expected to rise about 10% in 2010.
SAIL, with annual capacity of 15 million tonnes, is the largest producer in India but lags Tata Steel that has capacity for 30 million tonnes, mostly from its Corus unit in Europe.
SAIL said net profit rose to Rs1,676 crore ($361 million) for the third quarter from Rs843 crore reported a year ago. Net sales rose to Rs9,697 crore from Rs8,724 crore.
A Reuters poll of 12 analysts had estimated a standalone net profit of Rs1,407 crore on net sales of Rs9,780 crore.
The company held cash reserves of Rs23,000 crore at the end of December and had debt of Rs1,4950 crore.
It plans to raise between Rs1000 to Rs2000 crore in the March quarter from the bond market for its capital expenditure plans, which finance head S. Bhattacharya expected to exceed the company’s earlier estimate of Rs1,0350 crore.
SAIL plans to spend between Rs12,000 to Rs13,000 crore for capacity expansion in 2010/11, Roongta said.
Shares in the company, valued at $20 billion, fell 3.1% to Rs216.35, in line with the Mumbai market that shed 2.9%. The stock more than trebled in 2009, outpacing the 81% rise in the main index.