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SAIL Q2 Misses Estimates As Sales Lag

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Steel Authority of India Ltd (SAIL) lagged expectations despite a 12 percent rise in quarterly profit, as lower sales and higher input costs capped gains.

SAIL, the largest steel producer in India, has seen sales impacted as demand cools in India's auto, consumer goods and construction sectors, which count among its major customers.

The economy's budgeted growth rate for 2012-13 was expected to be 7.6 per cent, but it only achieved 5.5 per cent in the June quarter, the slowest in three years.

The state-owned steelmaker, which manufactures a range of products such as cold rolled coils and sheets, pipes, wheels and axles, reported a decline in net sales to Rs 10,663 crore from Rs 10,837 crore a year earlier.

Increased fuel costs and other expenses plus higher wage expenses, from a new salary agreement applicable since January 1, also contributed to lower operating margins.

SAIL said net profit rose to Rs 543 crore in the three months to end-September from Rs 485 crore a year earlier. A Reuters poll of brokerages had estimated on average net profit of Rs 730 crore for the quarter.

"The results were below our estimates and were a disappointment on the operational front," brokerage said in a note after the announcement.

Most analysts had expected the company to report higher sales volumes for the quarter and benefit from a decline in coking coal prices globally. SAIL imports 75 per cent of its coking coal requirement.

SAIL reported sales volume of 2.26 million tonnes compared with 2.81 million tonnes a year ago. Earlier, it had reported a 4 percent increase in saleable steel output at 3.18 million tonnes.

SAIL, with annual capacity of about 14 million tonnes, is the largest steel producer in India, but lags Tata Steel's global capacity of about 27 million tonnes. Under an ongoing expansion programme, the company expects to increase capacity to 18 million tonnes by March-end.

SAIL shares closed lower after the results announcement, down 1.2 per cent in a Mumbai market that ended 0.3 percent lower. The stock, valued at $6.3 billion, have risen just 1 percent so far in 2012, underperforming a 22 percent increase in the main stock index.