Steel Authority of India Ltd., the nation’s second-biggest producer, posted a 35 percent drop in its first-quarter profit as waning demand dragged down prices.
Net income declined to 4.51 billion rupees ($73 million), or 1.09 rupees a share, in the three months ended June 30 from 6.96 billion rupees, or 1.69 rupees, a year earlier, according to an exchange filing today. That beat the 2.89 billion-rupee median profit estimate of 27 analysts surveyed by Bloomberg. Sales fell 5 percent to 101.1 billion rupees.
Steel demand in India grew at the slowest pace in five years as a wobbling economy impeded construction of public works and high interest rates kept people from building houses and purchasing cars. A record decline in the rupee raised the cost of importing coking coal, a key raw material, narrowing margins at mills. Companies, including Essar Steel Ltd. and JSW Steel Ltd., are increasing exports to boost sales and counter the rupee’s fall.
“Steel Authority is facing tremendous issues in pushing sales and is being edged out by rivals,” said Abhisar Jain, an analyst at Centrum Broking Pvt. in Mumbai, who has a hold rating for the shares. “With high fixed costs, we see limited room for improvement.” Jain said he may consider downgrading the stock.
The shares of the New Delhi-based company fell as much as 3.4 percent to 42.80 rupees and traded at 43.45 rupees as of 2:59 p.m. in Mumbai. The stock has declined 52 percent this year, compared with a 0.7 percent drop in the benchmark index.
Total costs were little changed at 9.7 billion rupees, according to the statement. Earnings from sources other than Steel Authority’s main business rose 37 percent to 974.4 million rupees.
India’s rupee touched a record low of 61.8050 per dollar on Aug. 6 after the central bank last month cut its economic growth forecast for the year through March 2014 to 5.5 percent from 5.7 percent. The nation’s record current-account deficit remains the biggest risk to Asia’s third-largest economy, the bank said.