SAIL slips into red, posts Q2 loss at Rs 1,056 crore

KOLKATA: SAIL has suffered a net loss of Rs 1056 crore in second quarter (Q2) ended September 30, 2015 against a net profit of Rs 649 crore with the company reporting a decline in sales during the quarter. This led to SAIL posting a half yearly net loss of Rs 1378 crore in H1 FY16, with poor demand and low sales realisation hitting its revenue and profitability.

Revenues for the quarter declined 20.72% to Rs 9387 crore, compared to a revenue of Rs 11841 crore a year ago. SAIL’s financial performance suffered during the quarter under review with sales realisation going down by 24% in Q2 FY16, over same quarter last year, corresponding to around Rs 7,500 per tonne. Worse, the company also saw steel sales decline by 6.7%. A steep fall in domestic steel prices led mainly by lower priced imports especially from China, Japan, Korea and CIS countries continues to pose a serious challenge to for Indian steel makers both at home and in export markets. While government support in the form of imposition of safeguard duty has given some relief to the industry, the latter will have to bear with low cost imports for some more time and may look for some more support from the government.

SAIL's profit slide saw the scrip lose nearly 4% to close at Rs 47.10 on the BSE on Friday.

Elaborating on the reason for the decline in profitability, SAIL said it incurred an additional expenditure of Rs 280 crore towards contribution to District Mineral Fund (DMF) under MMDR Amendment Act -2015. There has also been an increase in interest & depreciation related charges with commissioning of the new facilities under the on-going modernisation and expansion plan.

In terms of physical volumes, in H1 2015-16, SAIL registered a growth in hot metal and crude steel production of 8% and 5% respectively over same period last year. Sales of long products used in construction registered a 20% growth over same period last year. However, sales of flat products declined by around 15% primarily due to a 75-day shutdown of the Hot Strip Mill at Bokaro for upgradation. The company said it is hopeful of improved performance in H2, FY16 with the work being completed at Bokaro. The upgrade includes installation of a new reversing roughing mill and heat shields would increase the capacity of the Hot Strip Mill from 3.9 mtpa to 4.2 mpta and enhance product quality too. A SAIL statement issued on Friday said with completion of capital repairs of one blast furnace during the quarter and ramping up of production gradually from the new units there, production of saleable steel is expected to see a significant increase.

Commenting on the performance, secretary, MSME and chairman SAIL, A K Pujari said: “SAIL is focused on ramping up production from the modernized facilities along with renewed thrust on production of value added steel and cost reduction.”