SAIL = STEEL AUTHORITY OF INDIA LIMITED = Q4 AND FY 2011 RESULTS = COSTS UP = MARGINS UNDER PRESSURE

Steel Authority of India Limited

NSE Symbol             SAIL

SAIL has released its operational and financial results for Q4 and FY 2011.

Highlights

Ø  SAIL FY '11 turnover up 7% to Rs. 47042 crore y-o-y.

Ø  Q4 turnover at Rs.13,137 Cr - grows 7% over Q3 and 1% over Q4 FY 10.

Ø  Q4 PBT & PAT 34% & 36% higher than Q3

Ø  Highest-ever value-added/special steel production – 6% growth in Q4; 3% in FY

Ø  Capex 13% higher in Q4 at Rs. 3278 cr.; exceeds Rs. 11000 cr. for full year

Ø  Company net worth crosses Rs. 37600 crore

Ø  Highest-ever labour productivity of 241 tonnes/manyear  

The company’s profitability during Q4 improved over the previous quarter due to better sales realisations despite market fluctuations and demand uncertainties. 

Profit before tax (PBT) at Rs. 2,188 crore was 34% higher than that in Q3.

Profit after tax (PAT) at Rs. 1,507 crore showed improvement of 36% over the previous quarter. However, the sharp rise in prices of inputs, especially coal, during the year resulted in adverse impact on y-o-y comparison of Q4 PBT and PAT, which fell by 29% and 28% respectively over CPLY.

On a yearly basis, rise in input costs impacted SAIL’s financial performance in FY ’11 by around Rs. 3,718 crore, of which Rs. 3,100 crore was on account of increase in price of imported coking coal alone. Hike in indigenous coal prices was to the tune of Rs. 350 crore. Further, the company had to bear additional cost of Rs. 2,200 crore on account of higher salaries & wages during 2010-11. These factors, and weakening market demand for flat products, were mainly responsible for SAIL’s FY ’11 PBT falling 29% y-o-y to Rs. 7,157 crore and 28% lower PAT at Rs. 4,881 crore.

SAIL Chairman Mr C.S. Verma :

 During Q4, the SAIL plants produced 3.43 million tonnes (MT) of saleable steel, a growth of 5% over CPLY, with capacity utilisation of 126%. 

This contributed significantly to the company’s production of 12.89 MT of saleable steel during FY ’11, a growth of 2% over the previous year, with capacity utilisation at 116%. 

Maintaining its thrust on production of value-added and special steels, SAIL achieved highest-ever Q4 production of value-added products at 1.26 MT, a growth of 6% over CPLY, as well as best-ever annual production of these high-value items at 4.8 MT, showing a growth of 3% over FY ’10. 

Growth was recorded in production of items such as electrode quality wire rods (37%), high tensile plates (29%), TMT-HCR wire rods & rounds (34%), LPG HR coils/sheets (12%), SAILCOR HR/CR products (69%), 90-UTS rails (2%), etc.

 Under SAIL’s modernisation & expansion plan, capital expenditure at Rs. 3,278 crore in Q4 was 13% higher than CPLY. During FY ’11, the company’s capex touched a record Rs. 11,280 crore, 6% higher than the previous year. All major facilities under the expansion plan of Salem Steel Plant were completed on schedule in Sept. ’10 and are under stabilisation for regular production. 

Also, Blast Furnace # 2 at Bokaro Steel Plant has been upgraded and commissioned in July ’10. At IISCO Steel Plant in Burnpur, some of the major new facilities like Sinter Plant, Pig casting machine, Main Receiving Station and Oxygen Plant are ready for commissioning. 

Included among the schemes related to improvement in quality, upgradation of existing facilities, replacement, etc., that have been completed during the year are:  upgradation of Plate Mill at Bhilai Steel Plant, installation of 700 tpd Oxygen Plant and simultaneous blowing of converters in SMS-II at Rourkela, and rebuilding of Coke Oven Battery # 10 at Burnpur.

To meet capex requirements for maintaining the schedule for modernisation & expansion, SAIL increased its market borrowings by around Rs. 3,650 crore during FY ’11. 

On 31.3.11, the company’s total borrowings stood at Rs. 20,162 crore, taking its debt-equity ratio to 0.54:1. The company’s cash reserves in term deposits stood at over Rs. 17,000 crore as on 31.3.11. 

SAIL’s net worth on 31.3.11 was Rs. 37,622 crore as against Rs. 33,317 crore a year ago.

SAIL’s thrust on optimisation of human resource resulted in overall reduction in employee strength by about 6,000, primarily on account of natural separation, even after fresh intake of about 1,750. As a result, labour productivity in SAIL plants in FY ’11 went up to 241 tonnes per manyear, the highest since inception, from the previous best of 226 tonnes per manyear achieved in FY ’10.

 FY ’11 was a landmark year for SAIL in terms of obtaining security of raw material supplies. Grant of forestry clearance by the Ministry of Environment & Forests (MoEF) for Ajitaburu, Budhaburu and Sukri-Latur leases of Chiria iron ore mines in Jharkhand in Mar. ’11 provided the ground for assurance of around 40% of the iron ore requirement of SAIL over the next 50 years being met. 

The company has already initiated actions for development of state-of-the-art mechanised mines in Chiria, initially with a capacity of 7 Mtpa. For this, SAIL has appointed a consultant of global repute – M/s Hatch Associates of Australia – for preparation of a detailed project report (DPR) that will provide the best beneficiation technologies available in the world today for efficient use of iron ore. The estimated cost for development of the Chiria mines is about Rs. 5,000 crore.

SAIL also obtained clearance from the MoEF for enhancing the mining capacity of integrated Barsua-Taldih-Kalta iron ore mines from the present level of 3.8 Mtpa to 8.05 Mtpa (along with beneficiation and pelletisation facilities) in Oct. ’10 and for development of Sitanala coking coal block in Dec. ’10.  Efforts are on to develop 0.3 Mtpa underground mine at Sitanala. In Sep. ’10, the Chhattisgarh government accorded approval for renewal of Baraduar lease, which has reserves of about 75 MT of low-silica dolomite.

A number of new strategic initiatives and alliances also made FY ’11 significant for SAIL. The major developments include the following:

Project-related activities have commenced at SAIL Growth Works in Kulti for setting up a railway wagon manufacturing unit in joint venture with RITES. The unit under the newly incorporated company, SAIL-RITES Bengal Wagon Industry Pvt. Ltd., will have the capacity to manufacture 1,200 wagons and rehabilitate 300 wagons per annum. The plant is expected to be commissioned by Mar. ’12.

In view of the locational proximity of its Jagdishpur Steel Unit to the national gas grid, SAIL is working with Kobe Steel of Japan to install a steel plant of 1.5 MT per annum capacity based on gas-based DRI technology and using Electric Arc Furnace for steel making with value added products at Jagdishpur. The feasibility of setting up a 1,000-MW gas-based power plant is also being examined.

SAIL and Burn Standard Company Ltd (BSCL) signed an MOU for setting up a factory which will manufacture cast steel bogies, couplers and other related products. The unit will come up on around 128 acres of leasehold land under the possession of BSCL at Jellingham, West Bengal. The Indian Railways have assured average offtake of 5,000 bogies and equal number of couplers per annum for a period of 10 years.

Process of amalgamation and merger of SAIL’s subsidiary Maharashtra Elecktosmelt Limited with the parent company is in its final stages. Order of merger is expected shortly.

QUARTERLY RESULTS TABLE

ANALYSIS

Net Sales has gone up to Rs.11944.74 cr  in Q4 FY 11 – up by 7.19% from Q3; Up by 12.66% from Q2; up by 32.29% from Q1; and down by 0.09% from Q4 FY 10.

Raw Materials Cost is Rs.6967.86 cr in Q4 FY 11 – up by 3.52% from Q3; Up by 9.49% from Q2; Up by 13.23% from Q1 ; and up by 19.23% from Q4 FY 10. Thus, while Net sales adown on  YoY basis, raw Material Cost is up by 19.23% on YoY basis.

Employees Cost has also gone up to Rs.2051.82 cr in Q4 FY 11; up by 10.11% from Q3; Up by 20.67% from Q2; up by 1.99% from Q1 and up by 25.26% from Q 4 FY 10.

Total Expenditure has therefore gone up to Rs.10211.68 cr – up by 3.18% from Q3 ; up by 7.72% from Q23; up by 33.64% from Q1; and up by 7.82% from Q4 FY 10.

Profit from Operations is Rs.1954.75 cr – up by 38.01% from Q3; up by 47.42% from Q2; up by 30.98% from Q1; but, down by 29.14% from Q4 FY 10.

Profit  before tax is Rs.2187.66 in Q4 FY 11; up by 34.36% from Q3; Up by               37.39% from Q2; up by 25.09% from Q1; but down by 28.67% from Q4 FY 10.

Net Profit is Rs.1507.12 cr – up by 36.09% from Q3(previous qtr); up by 38.27% from Q2; Up by 28.09% from Q1; but down by 27.71% from Q4 FY 10.

Basic EPS  is Rs.3.65 against a Face value of Rs.10 in Q4 FY 11; against Rs.2.68 in Q3; Rs.2.64 in Q2;  Rs.2.85 in Q1; and Rs.5.05 in Q4 FY 10.

Thus, there is progress in Q4 Fy 11 compared to previous quarters of the year, yet, compared to the corresponding qtr of previous year (Q4 FY 10), there is a distinct downturn in financial terms.

QTRLY RESULTS TABLE :

SAIL	31-Mar-11	31-Dec-10	30-Sep-10	30-Jun-10	31-Mar-10
Net Sales	1194474	1114320	1060288	902937	1195520
Raw Materials	696786	673073	636368	615386	584406
Employees Cost	205182	186347	170037	201171	163807
Total Expenditure	1021168	989648	948021	764097	947114
Profit from Operations	195475	141636	132596	149235	275862
Other Income	40747	27108	37538	38620	44293
Interest	17456	5924	10904	12964	13471
Profit  before tax	218766	162820	159230	174891	306684
Tax expense	68054	52073	50229	57226	98194
Net Profit	150712	110747	109001	117665	208490
Face Value (In Rs	10	10	10	10	10
Paid Up Equity	413040	413040	413040	413040	413040
Basic EPS	3.65	2.68	2.64	2.85	5.05
Public holding (%)	14.16	14.16	14.16	14.16	14.16

ANNOUNCEMENTS TO NSE

29-04-2011          Steel Authority of India Limited standalone Results for the quarter ended on 31-MAR-2011 as follows: Net Sales of Rs. 1194474 lacs for quarter ending on 31-MAR-2011. Net Profit / (Loss) of Rs. 150712 lacs for the quarter ending on 31-MAR-2011. 

24-01-2011          "Steel Authority of India Limited (SAIL) has signed a memorandum of understanding (MoU) with IRCON International Limited, a PSU under the Ministry of Railways, for jointly working on rail infrastructure projects both in India and abroad. The MoU is the first step by SAIL and IRCON towards joining hands for efficient execution of public-public and public-private partnership projects of the Indian Railways as well as participating in rail infrastructure projects in developing countries where presently there is no infrastructure for evacuation of raw materials."

NOTE : SAIL Consolidated Annual Results  for FY 2011 with comparison of 2 previous years is given in Post 2 under the URL : 

http://wiseinvestmentideas.blogspot.com/2011/06/sail-steel-authority-of-india-limited_24.html

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