India: SAIL Likely to Post Loss in Q2

Steel Authority of India Ltd’s (SAIL) losing streak is likely to continue for the sixth consecutive quarter in July-September period of the current fiscal even as the country’s largest public sector steel maker had recorded good sales growth in July and August.
 
Market sources said higher interest and depreciation costs might come in the way for the state-run firm to return to profitability. After nearly 13 years, SAIL plunged in the red for the first time in the April-June quarter of last fiscal.

During the April-June quarter of the last fiscal, the company had reported INR 322 crore loss. This went up to INR 1,056 crore in July-September period and further to INR 1,529 crore in the October-December quarter though loss narrowed a little to INR 1,231 crore in the subsequent quarter. In the first quarter of the current fiscal, net loss stood at INR 536 crore. Higher imports, subdued domestic price amid anemic domestic demands spoiled the party for all steel firms. 
 
Barring the first quarter of current fiscal, SAIL’s interest and depreciation costs were on the rise on account of capitalization of new assets for quite sometime now. However, despite higher ebitda, the company failed to report profits in the April-June quarter of the current fiscal primarily owing to higher interest and depreciation costs.

“The same trend is likely to continue in the second quarter of current fiscal,” sources said.

In the first two months of July-September quarter, SAIL sold 0.9 MT and 1.24 MT steel respectively compared to a total of 2.8MT steel in the April-June period of the current fiscal. Sources said the company clocked good sales growth in September as well.

The chances of SAIL coming into black in the third quarter are also bleak as higher coking coal prices might take a huge dent to its bottom line. The coking coal prices have zoomed nearly three-fold in recent times and SAIL depends largely on imported coking coal to run its blast furnaces.     
 
SAIL’s loss, interest and depreciation (in Cr):

Source: BSE