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| Steel companies show marginal growth in Q1 |
| Ishita Ayan Dutt / Kolkata Aug 06, 2010, 00:11 IST |
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A slow demand recovery resulting in extreme prices pulled down the performance of the steel companies in the first quarter.
 The bottomline of the steel companies—Bhushan Steel, JSW Steel, Jindal Steel & Power (JSPL), Steel Authority of India (SAIL), JSL —improved marginally by 1.51 per cent.
However, if SAIL is discounted, which was impacted by the employee cost to an extent, then all other companies under consideration saw an increase in net profit between 3 per cent and 45.2 per cent. Revenues of all companies taken together, grew 9.47 per cent.
The first quarter was marked by huge swings. At the beginning of the first quarter, prices touched a yearly high, but softened thereafter, largely due to overcapacity and seasonality.
Prices of hot-rolled coil, the benchmark for flat steel — used in the automobile and white goods sectors — was hovering at Rs 35,000 a tonne and then dropped to Rs 32,000 a tonne during the quarter.
The impact was, however, partially redeemed by reducing raw material prices. Iron ore prices came down from $177 a tonne to $124 a tonne, though the other key raw material, coke, remained more or less at a flat level.
“First quarter prices were stagnant compared to the last quarter, but year-on-year, it was much better,” said Sushil Maroo, director, JSPL. On a standalone basis, JSPL, net profit increased 45.2 per cent, on the back of reduction in raw material cost and better product mix.
Bhushan Steel, which registered a 20 per cent rise in net profit, was helped due to the drop in raw material cost. According to Angel Broking, raw material cost as a percentage of revenue fell to 54.6 per cent in the first quarter from 66.1 per cent in the same period last year.
On a consolidated basis, JSW Steel reported a 26 per cent rise in net profit to Rs 295.37 crore on a 20 per cent rise in net sales to Rs 4,819.33 crore.
However, there is a silver lining and the outlook on prices is much better in the current quarter. “In the next quarter there could some increase in prices,” said Jayant Acharya, director (sales & marketing), JSW Steel.
If not demand recovery, prices could be led by raw material cost push, with iron ore already clawing back.
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