Earnings Review: SAIL net profit falls 80%, hit by steep EBITDA fall

 10 Aug 2022

Steel Authority of India Ltd's bottomline in the June quarter was hit severely by a volume decline and a drop in operating profit.

The company's net profit for the June quarter fell 80% on year to 7.8 bln rupees. It, however, topped analyst estimates of 5.3-7.6 bln rupees.

The steel company in which the government holds a 65% stake reported net sales of 240.3 bln rupees, up 16% on year. It was below analysts' estimate of 244.7 bln rupees.

The sales growth was restricted as volume declined 5.4% on year to 3.2 mln tn in Apr-Jun even though crude steel production rose 15% to 4.3 mln tn.

The company said that the volume decline was on account of subdued market demand.

It said that the decline in global demand for steel had a direct bearing on the domestic market. The weak demand and fall in steel prices during May-Jun had a bearing on the price realisation, the company said.

Among SAIL's largest three steel plants, the one at Bhilai saw net sales rise to 70.3 bln rupees in Apr-Jun from 55.8 bln rupees a year. Net sales from the Rourkela steel plant were up at 64.7 bln rupees from 59.2 bln rupees while that from the Bokaro steel plant increased to 67.2 bln rupees from 64.5 bln rupees.

The operating profit, defined as earnings before interest, tax, depreciation and amortisation, dived 61% on year to 26.1 bln rupees.

The company's operating margin contracted substantially to 10.9% in Apr-Jun from 32.3% in the year ago period. It was also lower than previous quarter's 15.6% margin.

The company attributed the operating profit fall to challenges in sales realisations, and high cost of production due to increase in imported coking coal prices.

Sequentially, SAIL's net profit was down 68% and net sales declined by 22%.

The company's consolidated net profit stood at 8.1 bln rupees in Apr-Jun, down from 39 bln rupees a year ago. Its consolidated net sales were up 16% on year to 240.3 bln rupees.