SAIL reports net profit of Rs 515 crore

MUMBAI: SAIL’s December quarter results were muted as realisations fell and higher employee costs squeezed the margins of the company.

Steel realisations fell by more than 5.5% for SAIL and stood at Rs 35,170 per tonne in the third quarter of FY13. Slightly higher volumes helped in partially offsetting the fall in price and led to a dip in net sales by nearly 1%.

On the cost front, SAIL continued to suffer from higher employee costs and other expenses. By virtue of it being a public sector unit, the company is compelled to provide more towards the employees and as a result the employee costs increased by 11.5% to RS 2,081 crore. Other costs also increased by 23.5% to Rs 1753 crore. Flat revenues and higher costs led to an operating margin contraction of 410 basis points.

The company provided for an exceptional item of Rs 31 crore in the last quarter as against Rs 466 crore charged in the same period year ago. Net profit (after adjusting for the exceptional item) was Rs 515 crore which was less than half the net profit in the corresponding period year ago.

Going forward, SAIL’s plans to increase its volumes from 12.4 MT to 20 MT by FY15 will substantially increase its volume. Moreover, captive iron ore capacities will also drive earnings for the company. However, the projects of the company have been facing delays for a long time and as a result cost over runs are eating up into the profits.