India: SAIL’s crude steel production, sales fall q-o-q in Q1FY23

PSU steel major SAIL announced its quarterly results for the quarter ended 30 June. The steel major reported a q-o-q decline in its crude steel production and sales volumes amid subdued demand and lower exports because of recent re-adjustment of duties by the government in late-May.  Furthermore, the company’s capex plan for the year stands at INR 8,000 crore, SteelMint learnt from the company’s investors’ call held on 11 August.

Highlights:

• Crude steel production down q-o-q: SAIL’s crude steel production dropped by 7% q-o-q to 4.3 mnt in Q1FY23, as compared with 4.6 mnt in the previous quarter. However, on a yearly basis, the same rose 13% against 3.8 mnt seen in Q1FY22.
• Steel sales fall q-o-q: Steel sales registered a sharp fall of 32% on q-o-q basis to 3.2 mnt in Q1FY23 compared with 4.71 mnt in Q4FY22. Similarly, sales fell by 3% y-o-y against 3.3 mnt in Q1FY22. Sales volumes were impacted by lower exports during the quarter.
• EBITDA decline q-o-q: The company’s EBITDA stood at INR 2,606 crores in Q1, down 46% q-o-q against INR 4,783 crores in the previous quarter.
• Update on head hardened rail: The head hardened rail is still under trial and one of the trials is successful. The quantities to be produced are yet to be finalised by the steel major, SteelMint learnt from the investors’ call held on 11 August.
• Update on PLI scheme: The company gave an update that it will be participating in the PLI scheme for rails from Bhilai.
• Higher NSR in Q1: The company’s average blended net sales realization (NSR) stands at INR 66,829/t in Q1FY23, higher than the previous quarter’s NSR of INR 59,495/t. The company also gave an update that the realization for rails was INR 67,000/t in Q1. In addition, the difference between the NSR of long and flat products was in range of INR 7,000-8,000/t.
• Inventory: The company’s finished steel inventory during the end of the June quarter stood at around 1.336 mnt.

The profitability of the company was adversely affected by surging coking coal prices in the previous quarter. However, the company expects the cost of production to come down with the fall in coking coal prices in the upcoming quarters.

Furthermore, the steel major expects domestic consumption to improve in the upcoming quarters.