UPDATE 1-India's SAIL Q2 misses estimates as sales lag

Thu Nov 8, 2012 7:35pm IST

Stocks

   

* Q2 net profit 5.4 bln rupees vs 7.3 bln estimate

* Says expects steel prices to firm up in coming quarters

* Shares slip after lower-than-expected profit (Adds details, quotes, brokerage comment)

NEW DELHI, Nov 8 (Reuters) - Steel Authority of India Ltd (SAIL) lagged expectations despite a 12 percent rise in quarterly profit, as lower sales and higher input costs capped gains.

SAIL, the largest steel producer in India, has seen sales impacted as demand cools in India's auto, consumer goods and construction sectors, which count among its major customers.

The Indian economy's budgeted growth rate for 2012/13 was expected to be 7.6 percent, but it only achieved 5.5 percent in the June quarter, the slowest in three years.

The state-owned steelmaker, which manufactures a range of products such as cold rolled coils and sheets, pipes, wheels and axles, reported a decline in net sales to 106.63 billion Indian rupees ($1.97 billion) from 108.37 billion a year earlier.

Increased fuel costs and other expenses plus higher wage expenses, from a new salary agreement applicable since January 1, also contributed to lower operating margins.

SAIL said net profit rose to 5.43 billion rupees in the three months to end-September from 4.85 billion rupees a year earlier. A Reuters poll of brokerages had estimated on average net profit of 7.3 billion rupees for the quarter.

"The results were below our estimates and were a disappointment on the operational front," brokerage ICICIDirect.com said in a note after the announcement.

Most analysts had expected the company to report higher sales volumes for the quarter and benefit from a decline in coking coal prices globally. SAIL imports 75 percent of its coking coal requirement.

SAIL reported sales volume of 2.26 million tonnes compared with 2.81 million tonnes a year ago. Earlier, it had reported a 4 percent increase in saleable steel output at 3.18 million tonnes.

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 27 million tonnes. Under an ongoing expansion programme, the company expects to increase capacity to 18 million tonnes by March-end.

SAIL shares closed lower after the results announcement, down 1.2 percent in a Mumbai market that ended 0.3 percent lower. The stock, valued at $6.3 billion, have risen just 1 percent so far in 2012, underperforming a 22 percent increase in the main stock index. ($1=54.5 rupees) (Reporting by Nidhi Verma and Prashant Mehra; Editing by Mike Nesbit)

Comments (0)
This discussion is now closed. We welcome comments on our articles for a limited period after their publication.

  • Most Popular
  • Most Shared

Market Eye

REUTERS SHOWCASE

HSBC PMI

HSBC PMI

Factory activity expands at slower clip in August.  Full Article 

Modi in Japan

Modi in Japan

Japan aims to double India investment in 5 years - Nikkei  Full Article 

Market Outlook

Market Outlook

Indian shares headed for correction, but outlook strong - BofA Merrill.  Full Article 

India Infrastructure

India Infrastructure

RBI rule handicaps India's infrastructure hopes  Full Article 

Book Talk

Book Talk

Reema Abbasi and a glimpse of Pakistan’s Hindu past  Full Article 

China Economy

China Economy

Retreat in China's PMIs heightens calls for policy easing.  Full Article 

Reuters India Mobile

Reuters India Mobile

Get the latest news on the go. Visit Reuters India on your mobile device.  Full Coverage