Dull Sales To Spell Sharp Dip In Sail Profits

Profits at Steel Authority of India (SAIL) for 1997-98 would be significantly lower than last year due to stagnant sales realisation, company chairman, Arvind Pande said.

'Our profits are going to be definitely less than last year. We will make profits, but it is going to be a difficult task,' he said.

Stagnant business, alongwith mounting operational costs were putting pressure and posing problems in sustaining profitability, he said. Pande indicated that the corporation would certainly look at the possibility of increasing prices whenever possible.

'Our net sales realisation have remained constant throughout the year. But on the other hand, input costs have gone up,' he added. Reeling under pressure of low demand, SAIL recorded a steep fall in profits during the first half at Rs 48.53 crore against Rs 361.45 crore during April-September 1996-97.

 

The Rs 14,000-crore steel major has been able to recover its cost of production despite stagnant steel prices so far, Pande said.

He hoped there would be an improvement in price next fiscal once the overall industrial growth picks up.

Pande attributed the dismal steel scenario to lack of investment in the infrastructure sector. 'Investments in power ports highways and housing are yet to happen. When this happens steel industry would pick up' he said. About economies in the corporation, he said 'so far we have succeeded in off-setting some of the increased input costs but making profits is a difficult task at this juncture.'

SAIL hopes to achieve the target of saving about Rs 800 crore through cost cutting measures during the current fiscal.

Stating that the entire steel industry was under pressure as steel consumption so far during 1997-98 registered a negative one per cent growth compared to about five per cent growth last year, Pande said major steel producers have had some informal consultations on prices.

However, he ruled out either a production or market sharing agreement among the steel producers. 'It is difficult in the present set up. It is not easy to implement. The question is who will cut production', he said.

Monopoly areas like rails would be the mainstay of corporation's profitability as is would have to compete in other areas with an ever-increasing number of new producers.

As part of its business re-orientation strategy, the company is looking at various operations with a clear view to wind up some 'uneconomical' operations, the chairman said.

SAIL would go for 100 per cent continuos casting route to produce finished steel and replace present operations through ingot route, Pande added.

Pande said SAIL would also identify and concentrate on products having larger margins like plates from Bhilai, intermediate steel products and hot rolled coils from its plants, which are being modernised to cater to specific demands.