SAIL Q2FY12 result update.

SAIL, India’s largest steel producing company announced its result for the September quarter 2011.  The net sales of the company stood at Rs 10836.68 crore higher by 2.2 per cent from its previous year corresponding quarter. The marginal growth in sales was majorly on back of 7 per cent increase in sales volume to 3 mn tonnes in Q2FY12 due to higher production. However the sales growth could have been higher if the realization wouldn’t have come down by 5 per cent.

On the operating side the EBITDA margin declined by 360 bps to 12.1 per cent due to higher Raw material and power/Fuel  prices which were by up by 15 and 28 per cent respectively. Also the EBITDA per tonne during the quarter stood at Rs 4421 lower than 20 per cent compare to its previous year corresponding quarter which was at Rs 5507.

Particulars	Q2FY12	Q2FY11	YoY	H1FY12	H1FY11	YoY
Production	3	2.9	3.4	6.1	6.1	0
Sales (Rs Cr)	10836	10602	2	21663	19632	10
Sales Volume (mn t)	3	2.8	7	5.6	5.3	6
Realisation/tonne	36120	37864	-5	38684	37042	4
EBITDA	1326.4	1542.1	-14	2,638	3,385	-22
EBITDA /Tonne	4421.2	5507.4	-20	4710.3	6386.6	-26

Moreover the major hit came on the bottom line of the company which declined by 54.6 percent to Rs 127 crore mainly because of higher forex translation (unrealized) losses of Rs 508 Crore due to adverse movement of the Rupee against dollar.  
The chairman of the company on the outlook said that we are hopeful of demand to pick up in the coming months with projects likely to take off in several major sectors, particularly Railways, Roads, Power, etc. This along with falling prices of input raw material prices should help the domestic steel industry combat the current challenges.

Steel industries during the quarter was beaten up by high input cost and lower demand which impacted  the top line as well bottom-line of the company. Moreover this was further augmented with sharp decline in the rupee that resulted in the huge forex notional loss reported on the company’s financial. 

Also World steel association has lowered down the growth projection on the grim outlook in US and debt issues in EU for FY12. And after continues rate hike by RBI this seems to be the case in India as well and we believe coming six month for demand to remain challenging.  However the current situation on the input cost side seems much better than before as the prices for coking coal and iron ore has fallen internationally due to slowdown in demand across world. Therefore for SAIL the coming quarter may see some relief on the margins however demand growth may remain slow. 

The stock closed at Rs 111.05, and was down up 1.16% after falling 3.6 per cent on the NSE after the result announcement. So far, has touched a high of Rs 111.60 and a low of Rs 109.55 in today’s trade.