SAIL Q2 net falls 55% to Rs 495 cr

Higher coking coal prices was one of the main reasons for the decline in profit

The falling rupee has hit the countrys largest steel producer Steel Authority of Indias (SAIL) margins. The government-owned company registered a 55 per cent drop in its second quarter net profit to Rs 495 crore from Rs 1,090 crore in the same period last year.

While the higher coking coal prices were one of the main reasons for the decline in profits,SAIL chairman CS Verma said the profits were down majorly due to foreign exchange losses.

If we exclude the exceptional item of foreign exchange variation of Rs 509 during the quarter,our profit before tax would have been almost at the same level as the previous quarter (April-June 2011). Though,the impact on account of foreign exchange is only notional, Verma told reporters on Thursday while announcing the quarterly results.

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SAIL had gained Rs 153 crore last year from the foreign exchange variation. The rupee feel around 30 paise more against dollar on Thursday.

SAILs raw material cost for the quarter increased by 15 per cent to Rs 561 crore and its manpower expenditure rose by Rs 296 crore.

Verma said even though the profits were down this quarter,the margins will be higher in the next one.

If you check our past records the second half of the year is always better in terms of production,sales and profits. With the additional capacity and demand picking up,I am confident that we will have better numbers in the second half of this financial year, the CMD said.

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He said even though the steel prices across the world have been falling a bit,in India,the prices will remain at almost the same level. Steel prices have come down globally. They have been relatively stable in India… I dont foresee a further dip in steel prices, he said.

The steel demand in the country is likely to grow at around 9 per cent,which is quite more than many parts of the other world markets. SAILs stock price fell over 3 per cent to Rs 109.20 on the Bombay Stock Exchange on Thursday.

Meanwhile,a day after steel minister Beni Prasad Verma cancelled his Korea visit over differences between SAIL and Posco on their proposed joint venture,the PSU said talks with the Korean company were positive but refused to give any time-frame for signing the agreement.

Verma said the plans have not been called off. We are having a dialogue on a very very positive note. There were issues needed to be discussed with Posco. But I am not seeeing any major hurdle. We have not scrapped the deal, he said.

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The two firms plan to set up a plant to produce 3 million tonne a year of auto-grade steel,but they are yet to agree on the shareholding pattern in the Rs 16,000 crore joint venture.