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Business News/ Home Page / SAIL Q1 net falls; dramatic demand rise unlikely
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SAIL Q1 net falls; dramatic demand rise unlikely

SAIL Q1 net falls; dramatic demand rise unlikely

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New Delhi: Steel Authority of India, one of India’s leading steelmakers, reported a smaller-than-expected 28% drop in quarterly net profit, but cautioned that any “dramatic upturn" in global demand for the alloy was unlikely.

The state-run firm, which has the largest steel making capacity within India, plans to borrow Rs4,000 crore to Rs5,000 crore ($830 million-$1 billion) this fiscal year to meet its capex plans, chairman S K Roongta said, adding that additional equity issue was also another option the company was looking at.

“We are considering that," Roongta said of the additional equity issue, without giving details.

The steel industry, recognised as a broad gauge of an economy’s strength, has globally seen demand tumble, driven by the weakness in key automotive and construction sectors.

“We must reckon the fact that even now globally capacity utilization is quite low. As the demand picks up, there is enough capacity," Steel Authority’s Roongta said.

“We are not going to see any situation where demand will be more than supply."

Prices are, however, not under pressure, he said.

Steel Authority’s production and sales in the July month is up about 10% from a year ago and it will try to maintain the trend for the quarter ending September, Roongta said.

He expects raw material prices to be sequentially lower in the September quarter.

The world’s top two steelmakers, ArcelorMittal and Nippon Steel, on Wednesday posted quarterly losses. Nippon Steel forecast a worse-than-expected loss in the six months to September while ArcelorMittal projected only a slow pick-up over the rest of 2009.

Profit Falls

Steel Authority said net profit fell to Rs1,326 crore for its fiscal first quarter ended June, from Rs1,835 crore a year earlier, hit by lower steel prices and higher input costs, mainly of coal.

Net sales fell to Rs8,951 crore from Rs10,722 crore a year earlier, even as sales and production in volume terms rose.

A Reuters poll of nine brokerages had expected net profit of Rs1,180 crore on sales of Rs9,850 crore.

Tata Steel on Wednesday missed forecasts with a 47% drop in net profit from its Indian operations.

Shares in Steel Authority, which the market values at about $15 billion, closed 3.3% higher at Rs175.65, outperforming the broader market that gained 1.4%.

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Published: 30 Jul 2009, 05:52 PM IST
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