India’s Top Steel Producer Posts 5th Straight Loss Amid Glutby
Shares decline as much as 6.6 percent, most in 11 weeks
Government investment in infrastructure seen boosting demand
Steel Authority of India Ltd., the nation’s biggest producer, reported a fifth consecutive quarterly loss as a global glut of the metal continued to weigh on prices. The stock plunged the most in 11 weeks.
The loss widened to 5.36 billion rupees ($81 million) in the first quarter ended June from 2.48 billion rupees a year ago, the company said in a statement Thursday. The producer took a one-time charge of 542 million rupees due to voluntary retirement compensation. Sales fell 3 percent to 90.8 billion rupees.
Steelmakers in India are reeling from global oversupply, sliding prices and high industry debt as China, the world’s biggest producer, exports its surplus amid weak domestic demand. While India has tightened import curbs to reduce the flow of cheaper products, supplies remain ample as local output climbs. Still, SAIL is optimistic about a recovery in demand and is ramping up output.
“We believe that on the back of a strong monsoon and government plans to invest massively in infrastructure such as roads, railways, highways, ports,” there will be increased steel demand, Chairman P.K. Singh said in a statement. The company has spent about a quarter of its planned budget this financial year, which ends March 31, to modernize and expand capacity, he said.
The company’s shares declined as much as 6.6 percent to 50.20 rupees, the biggest drop since June 24 in Mumbai on Friday. The stock has climbed 6.3 percent this year, after plunging 41 percent in 2015, on expectations the government measures will curb imports and demand will increase as a good monsoon boosts incomes and spending.
State-run Sail is spending 40 billion rupees this year on increasing capacity by 43 percent to 21.4 million metric tons by 2018, part of a longer term goal of achieving 50 million tons in the next decade, Singh said last month.
Concerns remain over the steelmaker’s weak margin profile as it makes the company highly sensitive to a decline in prices and uncertainty of timelines for volume expansion, Ambit Capital Pvt. Ltd. said in a report Friday.
The weakness in the steel market also hit Jindal Steel & Power Ltd., which saw its loss in the three months through June almost double from a year earlier to 10.8 billion rupees, the New Delhi-based steelmaker said in a separate statement Thursday. The company’s shares fell as much as 5.9 percent to 81.50 rupees Friday, the lowest level this year.