Steel: Raw material costs hurt margins

The steel sector was hit badly due to slowdown in infra projects, high interest rates and falling capex.

Domestic steel prices were stable due to fall in supply from Karnataka region which accounts for over 20 per cent of Indian steel production.

However, rupee depreciation inflated coking coal cost and offset the benefit of higher realisation.

The operating margins of all steel makers declined sharply by around 500 bps due to 320 bps rise in cost of raw materials compared to the year ago period.

For JSW Steel, the margin dip was sharper at around 700 bps, largely on account of inadequate iron ore and lower volume.

Tata Steel’s margins fell by over 500 bps led by weak prices in Europe and high cost of raw materials.

SAIL witnessed a 580 bps fall in margins led by high power, fuel and other operational costs.

The result: Net loss for many players. Tata Steel, Jindal Stainless and JSW Ispat reported net losses.

SAIL reported a significant decline – 43 per cent – in net profit. SAIL's net worth, however, grew by Rs 2,503 crore to Rs 38,618 crore as on December 31, 2011, and the company's board approved an interim dividend of 12 per cent of the paid-up capital.

Bhushan Steel, however, bucked the trend by maintaining profits on a year-on-year basis.

Tata Steel went into red again after two years, reported consolidated after tax loss of Rs 687 crore.

The company said the rise in input costs for the European operations and weaning demand for the metal was the major cause.

Tata Steel Europe posted an operating loss of Rs 781 crore in the quarter, as compared to profits of Rs 392 crore.

	Net Sales			Net Profit
YoY in %	Jun ' 11	Sep '11	Dec '11	Jun ' 11	Sep '11	Dec '11
Tata Steel	21.6	15.7	15.2	195.7	-92.9	-
S A I L	19.7	2.2	-4.9	-28.8	-54.6	-42.9
JSW Steel	54.3	37.7	40.9	70.3	-75.2	-86.8
JSW ISPAT	4.8	22.2	177.5	-	-	-
Bhushan Steel	62.6	43.4	23.9	2.1	-20.1	-1.3
Jindal Stain.	21.4	5.6	10.2	-12.5	-	-
Lloyd Steel Inds	59.4	77.7	35.0	-	-	-
Uttam Galva	44.1	-1.0	6.3	-69.1	-22.9	9.1
Varun Inds.	127.3	2.0	46.2	59.4	24.4	258.6
Jindal Saw	-0.2	80.5	2.8	-45.2	-47.4	-70.8
Total	26.4	17.3	16.8	56.3	-89.2	-