SAIL Net Drops Over 70% In March 2013 Quarter

Steel Maharatna SAIL came out with very disappointing set of numbers for the fourth quarter of FY13. The company posted net profits of Rs 446 crore for Q4FY13, which was down 72% on a yearly basis. Such a sharp drop in profits may be attributed to higher employee and interest costs. During the quarter, the employee costs for the company increased by 44% on a YoY basis to Rs 2473 crore, whereas the interest burden has almost doubled YoY to Rs 214.6 crore.

SAIL's topline also came in lower, and the net sales of the company saw a decline of 9.2 % on a yearly basis to Rs 12162 crore. This was primarily due to lower sales volumes for the quarter, coupled with lower realisations. The company's volumes declined by 3% to 3.2 million tonnes on a yearly basis, whereas its realisations stood at Rs 38,008/tonne for the recently concluded quarter as against Rs 40,598/tonne in Q4FY12. The lower realisations and higher employee costs also pulled down the EBITDA margins of the company by 637 basis points YoY to 7.6%.

At present, SAIL is trading at a price-to-earnings multiple of 11.2x, which looks pretty high for a commodity stock.