The last quarter was particularly harsh for SAIL, with net profit nosediving 58% to Rs 1,100 crore from Rs 2,677 crore year-on-year.
KOLKATA: Global steel prices, which declined 22% between April and December, 2005 over the corresponding period a year ago, have taken a severe toll on the bottomline of Steel Authority of India Ltd (SAIL). The PSU on Thursday reported a 41% dip in its net profit for 2005-06 at Rs 4,013 crore from Rs 6,818 crore the previous fiscal.
The last quarter was particularly harsh for SAIL, with net profit nosediving 58% to Rs 1,100 crore from Rs 2,677 crore year-on-year. The impact of soft global and domestic prices through the year and poor realisations were evident in the financials that showed that even though SAIL was able produce 12 million tonnes of saleable steel, the highest ever and notched up total sales of 11.3 million tonnes, the total sales turnover was up a meagre 2% at Rs 33,220 crore compared to Rs 32,564 crore in 2004-05.
Notably, the financials included the financial performance of IISCO, which was merged with SAIL recently.
Interestingly, despite the 41% fall in profits, the net profit for 2005-06 is the second highest ever posted by SAIL in its 33 year of operation. Clearly, the highest ever net profits, achieved in 2004-05 on the back of an unprecedented bull run in international steel market, has not proved sustainable.
While realisations were affected by steadily dipping international and domestic steel prices, a diametrically opposite trend in rising cost of input proved to be a double whammy for SAIL. Total expenditure during the year increased 18% at Rs 21,931 crore, with raw materials accounting for the biggest rise in expenditure at with a 29% jump to Rs 11,404 crore.
SAIL chairman V S Jain said, “With the current trend of steel prices improving and price of coking coal reducing, the adverse impact on profitability will be substantially neutralised in the coming months. Envisaging higher production and productivity, SAIL is confident of meeting any competitive challenge from domestic and global players.”
The PSU was however successful in limiting the impact of a negative environment on its bottomline by reducing market borrowings by Rs 1,472 crore to Rs 4,298 crore and thus lowering the interest burden by Rs 137 crore.
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