lower NSR and higher costs pull SAIl Q1 margins

In the first quarter of FY 16 (Apr-Jun ‘15), saleable production, crude steel and hot metal production of Steel Authority of India limited (SAIl) recorded a growth of 6%, 11% and 14% respectively over CPlY. Inspite of growth in production, SAIl’s gross turnover at Rs10552.38 crores is lower by 15.7% as compared to CPlY primarily due to 15.3% dip in Net Sales Realisation which affected the company’s bottom-line with a consequent net loss of `321.64 Crores.

Apart from lower net sales realization; increase in royalty on iron ore from 1st September 2014, increase in the purchased power rate etc. also added to the losses. Though domestic steel consumption witnessed a growth of about 7% in Q1 of FY 16, the Country witnessed an unprecedented increase in imports from countries like China, Japan, Korea, Russia, etc. by 54% in Q1 of FY16 compared to CPlY and this eroded a large market chunk of the domestically produced steel. lower exports from India, which fell by 31% in Q1,further affected the demand-supply balance.

The effect of the subdued quarterly performance has been partially offset by improvement in techno-economics such as lower coke rate with an improvement of 4% over CPlY, higher CDI usage with 2% improvement, lower energy consumption with 1% improvement over CPlY, lower store &spare consumption and lower imported coking coal price.

Going forward, Government’s support to the domestic steel industry in the form of upward revision in customs duty on import is a step in the right direction and the industry is expected to get some support in ensuring stable price regimen. Rakesh Singh, Secretary, Government of India and Additional Charge, Chairman SAIl said, “The Company is following a strategy where in addition to increasing volumes and focused cost reduction, the thrust will be on maximizing production of value added products to get the benefit of increased infrastructure spending in the near future.”