Steel companies to witness sequential drop in Q1 earnings: Report
Q1 earnings of steel companies to decline sequentially due to lower steel realization and use of high cost coal inventory, says Kotak Institutional Equities
New Delhi: Steel companies will witness a sequential decline in first quarter earnings on use of high cost coal inventory, besides other factors, brokerage firm Kotak Institutional Equities said.
“Domestic metal names will report sequential decline in earnings led by lower prices, increased input costs and lower volumes (a few cases of outages). We expect earnings of steel companies to decline sequentially due to lower steel realisation...and use of high cost coal inventory,” it said in a report.
Earnings of non-ferrous firms will also be weak due to lower prices, increase in input costs and a few cases of plant outages.
“We expect earnings to improve beyond first quarter past one-off factors (high cost inventories, outages) and on higher prices,” it said.
Domestic steel demand remained weak with 4% growth to 13.8 million tonnes (MT) in April-May 2017.
“Our channel checks also indicate that uncertainty over GST (goods and services tax) implementation led to weak sales in June 2017. Given the subdued domestic demand, export sales increased to 1.4 MT for April–May, thereby aiding 6% growth in production for domestic steelmakers,” it said.
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