Steel Authority Profit Misses Analyst Estimates on Lower Prices

Steel Authority of India Ltd., the nation’s second-biggest producer, posted a worse-than-expected 72 percent drop in fourth-quarter profit as weak demand led to a decline in prices.

Net income for the three months ended March 31 dropped to 4.47 billion rupees ($80 million) from 15.8 billion rupees a year earlier, the New Delhi-based company said today in an exchange filing. The median profit of 26 analyst estimates compiled by Bloomberg was 8.3 billion rupees. Sales fell 9 percent to 122 billion rupees.

India’s steel consumption grew at 3.3 percent in the year ended March 31, the slowest pace in four years, following a drop in car sales and construction. Waning demand and higher imports from Japan and South Korea caused prices to fall.

The company sold 3.24 million metric tons of steel in the quarter, little changed from a year earlier. Net sales realization fell 11 percent to 34,489 rupees a ton in the last quarter from a year ago, Chairman C.S. Verma said in a press conference after the earnings were released.

Lower prices eroded Steel Authority’s revenue by 13.5 billion rupees in the last quarter, Verma said. Hot-rolled steel coil, a benchmark product used in automobiles and buildings, declined 10 percent to an average 39,170 rupees, according to Bloomberg calculations based on data from Metal Bulletin.

The shares fell 1.2 percent to 59.05 rupees at close in Mumbai. The benchmark S&P BSE Sensex rose 0.3 percent.

A drop in raw material prices cushioned the profit decline. Benchmark prices of coking coal, a key steelmaking ingredient, slumped to a record $165 a ton during the quarter amid a drop in demand from China and Japan, the world’s largest importer, and rising production in Australia, South Africa and Mongolia. Steel Authority imports about 70 percent of its coking coal needs.

Total costs fell 5 percent to 116 billion rupees, while finance costs surged 78 percent to 2.15 billion rupees, according to the statement.

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