PSU Steel major SAIL has set its FY23 guidance for crude steel production at 17-17.5 million tonnes (mnt), while sales guidance stands at 16-16.5 mnt, SteelMint learned from the company’s report for the quarter ended 30 September, 2022 (Q2FY23). Falling steel and raw material prices impacted the company’s performance during the quarter.
Key takeaways from SAIL’s quarter results:
1. The plan for CAPEX for FY23 is around INR 6,000 crore, out of which INR 2,000 crore have been already spent in H1FY23. The company plans to spend the remaining INR 4,000 crore on projects such as refurbishing of blast furnaces, coke ovens, and casters in Rourkela Steel Plant and Bhilai Steel Plant.
2. Imported coking coal prices dropped q-o-q by INR 6,000/t ($74/t) to INR 33,000/t ($407/t) in Q2 against INR 39,000/t ($481/t) in Q1. Furthermore, the company expects another INR 5,000/t ($62/t) reduction in coking coal prices in Q3FY23. Also, there has been a substantial reduction in the usage of coking coal as the company has started using indigenous coal.
3. Update on head-hardened rails: The company informed that negotiations with the Indian Railways are on for finalisation of pricing of head-hardened rails. Furthermore, an application for PLI scheme for production of head-hardened rails has already been submitted. This shall benefit the company in achieving a better price for such rails and improving the net sales realisation (NSR).
4. Plant-wise profitability: SAIL plants that produce flat steel products such as the Rourkela Steel Plant, Bokaro Steel Plant and Bhilai Steel Plant have posted negative results for the quarter due to the major correction in flat steel prices, while plants like the Durgapur Steel Plant and IISCO Steel Plant (ISP) that focus on long products have posted positive results because long steel prices remained relatively unaffected compared to flat steel products.
Other highlights:
a. EBITDA declines q-o-q: The company’s EBITDA stood at INR 1,174 crore in Q2, down 55% q-o-q against INR 2,606 crore in the previous quarter.
The NSR stood at around INR 57,000-58,000/t ($703-715/t) during the quarter. Product-wise, long steel prices fell by INR 6,000/t ($74/t) and flat steel prices by INR 13,000/t ($160/t) q-o-q in Q2. The company expects the NSR in Q3 to be at similar levels.
During H1FY23, the company’s profitability was adversely affected by higher coking coal prices. SAIL expects to deliver better results in the coming quarter with the cost of production coming down further.
b. Crude steel production stable q-o-q: SAIL’s crude steel production remained stable q-o-q at 4.3 mnt in Q2FY23. However, it fell 4% y-o-y against 4.5 mnt in Q2FY22.
c. Steel sales up q-o-q: Steel sales rose by 31% q-o-q to 4.2 mnt in Q2FY23 compared with 3.2 mnt in the previous quarter. However, sales fell by 2% y-o-y against 4.3 mnt in Q2FY22. Sales volumes were majorly impacted by lower exports during the quarter.
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