SAIL Q2 Profit Falls 55% to Rs 495 cr on High Costs, Forex Fluctuations.

MUMBAI: Steel Authority of India ( SAIL) the country's largest steelmaker by capacity, said its net profit in the fiscal second quarter fell 55% due to higher costs and foreign exchange variations.

But strong demand from proposed investments in infrastructure in India and softening raw material prices would likely improve the steel industry prospects in the second half, said chairman Chandra Shekhar Verma. The Delhi-based steelmaker's profit was down at Rs 494.6 crore, from Rs 1,090 crore last year. Revenue in the same period was nearly flat at Rs 10,979.6 crore.

"We are hopeful of demand to pick up in the coming months with projects likely to take off in several major sectors, particularly railways, roads and power. This along with falling prices of input raw material prices should help the domestic steel industry combat the current challenges," he said.

Coking coal, which SAIL imports, accounted for more than half of the raw material impact cost of Rs 1,916 crore in profit before tax during the first half of the year. The impact of the appreciation of the dollar against the rupee during the first half was Rs 579 crore.

Since India has no known reserves of coking coal, used primarily by steelmakers, it is entirely imported. Flooding in Australia, one of the largest exporters of coking coal, had pushed up prices to record levels of $350 a tonne in February. But it has now softened, with SAIL signing an agreement to buy coking coal at $250 a tonne for the Oct-Dec quarter.

The company's board has approved a special purpose vehicle to revive the Sindri unit of Fertiliser Corporation of India and has submitted its draft rehabilitation scheme to the Board for Industrial and Financial Reconstruction.

The mines ministry recently reserved 140 hectares of iron orebearing area in Bellary district, Karnataka for exploration and mining by VISP, a unit of SAIL. SAIL has issued a global tender for building a 10mt beneficiation and 4mt pelletisation plants at Gua iron ore mines to improve the quality of ore and make the mines' operations more sustainable.

Source : economictimes.indiatimes.com