Steel Authority of Indias net profit has fallen by a staggering 86.5 per cent to Rs 48.53 crore in the first half, as higher depreciation and interest costs eroded the companys profitability despite a marginal improvement in sales income. Last year the company had recorded a net profit of Rs 361.45 crore in the first half.
The poor run of steel companies which began in the second half of the 1996-97 fiscal thus continues in the first half this year. Sails nearest competitor, private sector major Tata Steel, had last week declaring a 30 per cent dip in net profits to Rs 176.48 crore for the first half. Despite poor market conditions and higher input costs, SAILs income from sales reached Rs 6825.72 crore at the end of the first half against Rs 6744.13 crore in the corresponding period, last year. However interest charges shot up to Rs 723.8 crore.
According to analysts, the increase in SAILs interest burden is mainly due to sluggish market conditions which has resulted in a sizable pile up in inventory levels.
The depreciation charges touched Rs 372 crore, mainly on account of capitalisation of modernised units at Durgapur and Salem, a rise of 16.3 per cent over the corresponding period in the previous year. SAIL has made a provision of Rs 5.7 crore for tax for the half year ending September 30, 1997. The steel ministrys performance budget had projected that the net profits are likely to remain low in 1997-98 since interest payments for the whole year are expected to go up further to Rs 1600 crore.
Between April and September 1997, SAIL had to face additional costs to the tune of Rs 500 crore resulting from hike in coal prices, petroleum products and freight charges. A company release said the cost increases in the first half were partially neutralised through internal cost reduction measures which yielded saved about Rs 300 crore. SAIL has been able to reduce its cost of production on a constant price basis by 3.5 per cent with improvement in techno-economic parameters like coke rate which fell by 5 per cent.
At the same time blast furnace productivity went up 11 per cent while energy consumption has come down marginally from 1.4 per cent.
Total steel sales grew 7 per cent primarily on account of higher exports which stood at 4.82 lakh tonnes. Last year, the company had exported only 1.57 lakh tonnes in the first half last year. At the same time SAILs domestic market share increased by 2 per cent during the period.
