A Rs 1,056-crore exceptional gain and cheaper coal fuelled Steel Authority of India's (SAIL) net profit in the July-September quarter to more than double at Rs 1,180 crore, although realisation fell by 6.5 per cent on subdued prices.
SAIL, which clocked Rs 543 crore net profit during the same quarter of 2012-13 fiscal, largely met its 15-16 million tonne (MT) coking coal requirements through imports, mostly from the US and Australia.
During the second quarter, the PSU got "exceptional" amount of Rs 1,056 crore from global mining major Vale towards damages due to non-supply of full quantity of contracted hard coking coal, leading to a big boost in the bottom-line.
However, this did not truly reflect on the profitability of the company as it had to make a provision, which stands at Rs 1,150 crore now, for an impending wage hike of its close to 85,000 non-executives.
"One of the reasons of increase in our profit was lesser prices of coal. The price of the imported coal which was $220 per tonne during the second quarter fiscal has come down to $135 per tonne. So, there was a savings of Rs 885 crore to the company on this account," SAIL Chairman CS Verma said.
On the flip side again was the dip in realisation to the tune of Rs 720 crore during the second quarter ended September 30, compared to the year-ago period.
"Sales realisation during the second quarter of the last financial year was Rs 37,210 per tonne. During this quarter, this came down to Rs 34,230 per tonne, thus there is a dip of 6.5 per cent in realisation," Verma said.
Despite the decline in realisation, which has a bearing on the prices, SAIL sold 3.015 MT steel during the quarter, against 2.616 MT a year ago, clocking a 15 per cent growth.
Turnover was also up by 7 per cent to Rs 12,802 crore.
SAIL's total expenditure, at Rs 11,067.42 crore, amounted to nearly 96 per cent of the total income during the July-September period. In the second quarter of 2012-13 fiscal, the expenditure (at Rs 10,113.63 crore) was 93.51 per cent of total income (Rs 10,815.56 crore).
Its finance costs were up over 16 per cent to Rs 216.48 crore, while other income declined by over 33 per cent to Rs 152.71 crore in the last quarter. The company's tax outgo also declined by over 13 per cent to Rs 212 crore in Q2 FY14.
Verma said steel demand will pick up in the coming days, but prices will hover around the same level.