Forex loss axes SAIL Q1 net profit to 18%

State-owned steel producer SAIL today reported a sharp fall of 18 per cent in net profit to Rs 696.41 crore during the April-June quarter, largely due to huge foreign exchange losses.

The company had posted a net profit of Rs 848.34 crore in the corresponding quarter of the last fiscal.

"There was adverse foreign exchange fluctuation, which led to a hit of Rs 245 crore in the first quarter. The dollar rupee exchange rate, which was 44.70 in June, 2011, stood at 55.63 in the current quarter. This impacted our profit," company Chairman C S Verma told reporters here.

He added that the company has not fully hedged its exposure in dollars against rupee fluctuations.

A decline of over 40 per cent in other income segment at Rs 278.45 crore during the quarter also impacted Steel Authority of India's (SAIL) profit. The steel producer had reported Rs 466 crore as other income in the April-June period of the last fiscal.

Besides, company's gross sales was almost flat at Rs 11,912.42 crore during the quarter against Rs 11,907.43 crore in the corresponding period of FY12.

For the current financial year, SAIL has kept a capex of Rs 12,000 crore on its expansion and regular activities, Verma said, adding that 50 per cent of this will be raised through debt.

Besides, the company is planning to spend about Rs 4,500 crore on development of Rowghat iron ore mines in Chhattisgarh, where the Home Ministry last month approved deployment of four battalions of paramilitary forces in the wake of Maoist threats.

"Now the requirement of security forces have been met … we will be making about Rs 4,000-4500 crore investment, mining plan is under finalisation. In two and half years time, the mining operations should get started," Verma said.

Despite getting all clearances way back in 2009, SAIL could not start the project which required felling of around 1.5 lakh trees as the local naxalites had declared that no trees would be cut and there would be one person killed for one tree cut.

Following this, SAIL had approached the Home Ministry for deployment of central paramilitary forces and was willing to foot the bill.

The Rowghat mines, spread over 2,000 hectares, has over 500 million tonnes iron ore reserves and is crucial for meeting SAIL's Bhilai Steel Plant's (BSP) iron ore needs.

During the quarter, the company consumed raw material worth Rs 5,642 crore compared to Rs 5,234 crore in the same quarter last fiscal. Power and fuel consumption during Q1 accounted for Rs 1,224 crore.

However, the Chairman said impact of higher input costs was partially neutralised by higher net sales realisations in the current quarter, which grew by 8.5 per cent.

Shares of the company today closed at Rs 85.30 apiece on the BSE, up 0.65 per cent from the previous close.

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