India: SAIL key highlights of Q1FY'22

The government-owned Steel Authority of India Limited (SAIL) conducted a conference call for Q1FY'22 results, today. The steel manufacturer posted good financial results while the operational performance was adversely impacted by the second wave of Covid-19.

1. Crude steel reported a decline by 16% q-o-q: Crude steel production fell by 16% q-o-q to 3.77 million tonnes (mn t) compared to 4.56 mn t in Q4FY'21. This was mainly due to the second wave of Covid-19 and repairs at a blast furnace in ISP for 23 days and another five days to get back to operational normalcy.

2. Sales decline 25% q-o-q: The sales volumes of the company in Q1 have come down by 25% to 3.327 mn t as compared to 4.435 mn t in Q4 of the previous fiscal. Demand in the country subsided due to the second wave of Covid-19 and lockdowns in the Apr-Jun'21 period.

3. Exports account for 11% of total sales: For Q1, the share of exports in total sales was 11% while total sales stand at 3.32mn t in Q1. The company shifted its interest to exports on better price realisations as compared to domestic prices.

4. EBIDTA grows 3% q-o-q: Reporting an EBIDTA of INR 6,674 crores, the company witnessed a 3% growth against INR 6,473 crores in Q4FY'21. However, the steelmaker had incurred losses of INR 125 crores in Q1 of the previous fiscal because of the Covid-19-led nationwide lockdown.

5. Sales guidance for FY22: SAIL, in its investors' conference call, highlighted that sales guidance will be around 16 mn t to 16.5 mn t for FY'22. The company is hopeful of achieving its target.

6. Domestic sales realisations: SAIL reported a 16% growth in domestic sales realisations in Q1 against the previous quarter. Also, net sales realisation from domestic and exports showed robust growth.

7. Net sales realisations: Net sales realisations (NSR) for flats stood at around INR 59,569/t in Q1 and for longs at INR 50,120/t. Meanwhile in Q4 NSR for flats stood at INR 50,419 and for longs at around INR 46,730/t.

8. Inventory: Inventory increased by 0.23 mn t to stand at 0.92 mn t by the end of this quarter.

9. Capacity expansion plans: The company has entered a new phase of expansion plans whereby it is planning to set up 14-15 mn t of additional capacity in its three plants in the next 15-18 months. The three plants where this is being planned are Bokaro Steel Plant, Rourkela Steel Plant (RSP), and Burnpur IISCO where enough land is available. The expansion plans are divided into two phases. Land mapping has been finalised at RSP while the same is still under discussion for other plants. Subsequent to this, layout planning will be done and after which the product mix will be finalised.

10. Coke rate higher in Q1FY'22: The coke rate stood around 456 kg/thm in Q1FY'22. Coke rates are higher due to older blast furnaces. Lower volume of production will increase the coke rate and higher volumes of production will reduce the coke rate.

11. Iron ore sales and dispatches: Iron ore sales booked through auctions are at 1.12 mn t which include 0.7 mn t of fresh mines and 0.4 mn t of subgrade fines in Q1. Also, the company dispatched around 8.60 lakh tonnes of iron ore in this quarter.

12. Domestic prices decline in July: Domestic prices reported a decline in flat and long products in July. The quantum was more for longs as compared to flats due to a slowdown in demand. However, demand is expected to pick up from September onwards but whether that will be accompanied by price rise or not is uncertain.

Outlook:
Demand in the latter part of the year is expected to remain healthy and help SAIL achieve robust performance along with sustained domestic consumption, mainly from sectors like infrastructure, manufacturing, automotive etc. Thus, the company is sizing up the opportunities to move up the value chain.