Steel Authority of India (SAIL) has registered a 74 percent decline in its bottomline for the year ending March 31, 1998, by posting a net profit of Rs 133 crore against Rs 515 crore recorded during the previous year.
However, the figures for the full year are better than the indication provided by the results for the first half of the year (April-September) which showed profits down to a negligible Rs 48.5 crore, compared with Rs 361 crore in the corresponding part of the previous year.
The second half of the previous year, Rs 153.55 crore, did not live up to the expectations raised by the first half profits of Rs 361 crore though traditionally second half profits outstrip the first half's. Thus second-half profit of Rs 84 crore this year represents a return to trend by improving on first-half profit of Rs 48.5 crore. SAIL has recorded a turnover rise of 3.6 per cent to Rs 14,624 crore, helped greatly by a 69 per cent rise in export sales to Rs 1,087 crore. The poorer price realisation in export sales has been only partially made up by better domestic realisation. But still overall realisation is down on last year as sales tonnage went up by 7 per cent, compared to revenue growth of only 3.6 per cent.
But the steel giant has had to pay dearly for its excess production which has led to interest costs rising by over 30 per cent to reach Rs 1554 crore. This, along with depreciation at Rs 795 crore-a rise of 15 per cent, on account of ongoing modernisation investments, has resulted in the sharp fall in net profit. The Board of Directors has recommended a dividend payout at 31 percent of profit after tax, which works out to Rs 41.30 crore. The increase in sales turnover has been possible due to aggressive marketing strategies adopted by SAIL though the overall market scenario had been sluggish, being characterised by acute demand crunch, increasing domestic competition and dumping of steel by overseas companies, points out a SAIL spokesperson.
"As a result of our cost saving exercise, the escalation in variable costs were contained to a mere 0.8 percent as against an increase of 6.5 per cent during the previous year," said Arvind Pande, chairman, SAIL.
While SAIL's overall profits have come down due to high depreciation and interest, the Bhilai and Bokaro plants continued to make healthy profits. Commenting on the performance, Arvind Pande said: "The last year was a very difficult year for the steel industry. In addition to input cost increase, SAIL has had to bear the burden of high interest and depreciation costs.
"However, the modernisation of our plants, specifically the return to large profits by Bokaro this year and the warm reception that the Rourkela hot rolled coils have received in the market make us confident of targeting higher profits in the current year." SAIL has had to bear this year additional costs on account of the capitalisation of its other units which are undergoing modernisation, expected increase in wages and higher input costs.
"We hope that the economy will revive sufficiently for SAIL to benefit from all expenditure on the modernisation of its units. At the same time, I would like to emphasise that short term profits are not the issue as we are in the process of restructuring and putting into place the infrastructure for long term profitability," Pande said.
