Despite a significant slowdown in the overall economy steel companies are expected to report healthy profits in January-March 2014, driven by lower input costs and price implemented by companies during the quarter.
On a year-on-year basis, net sales of steel companies are likely to improve due to increase in both volumes as well as prices. Margins are also likely to improve due to higher prices on a year-on-year basis. Tata Steel, JSW Steel, Steel Authority of India — all are expected to report healthy profits in the fourth quarter, experts said.
According to average estimates of three brokerages, Tata Steel is expected to report 24.2 per cent increase in its profits to Rs 1,099 crore, Steel Authority of India is expected to report 28.5 per cent increase in net profit to Rs 553 crore, and JSW Steel is expected to report 12 per cent increase in its net profit to Rs 354 crore.
Sanjay Jain, an analyst at Motilal Oswal, said, “We expect the profitability of steel companies to improve year-on-year. This is on account of higher prices, which were aided by rupee depreciation against the dollar.”
Steel prices declined sharply in the US and China while domestically the prices showed an upward move. The steel prices in US and China declined by 7.0 per cent and 4.5 per cent quarter-on-quarter. Indian steel companies had announced price hikes in October and November and hence prices rose by 5.6 per cent sequentially.
Spot coking coal prices continued to decline during the fourth quarter. Iron ore contract prices and spot prices have declined sharply during the quarter.
Global iron ore prices decreased during the quarter due to lower demand from China as inventories in China continued to pile up. During the quarter, average spot iron ore prices for 63.5 per cent Fe grade (CFR, China) decreased by 10.0 per cent sequentially $121 per tonne after weak Chinese economic data in the month of March. Hence, iron ore contract prices in the fourth quarter declined, said Bhavesh Chauhan, an analyst at Angel Broking.
Further lower steel imports during the year will help the companies to boost sales. Steel imports had risen by 15.3 per cent year-on-year in 2012-2013 to 7.9mn tonne as Indian steel players continued to face the threat of imports from FTA countries (which attract lower import duty). However, during April 2013-February 2014, steel imports by India have decreased by 31.1 per cent year-on-year to 5.0 million tonne on account of lower domestic demand and rupee depreciation against the dollar (which makes imported steel expensive vis-à-vis domestic steel).
A Prabhudas Lilladher analyst, declining to be identified, said, “Steel companies are expected to report strong performance in the quarter on back of lower coking coal and iron ore prices. Volumes have also improved due to focus in exports by steel companies in the quarter due to rupee depreciation.”
According to World Steel, global crude steel production decreased by 0.4 per cent to 130 million tonne in January, whereas it increased 0.6 per cent year-on-year to 125 million tonne in February. Global capacity utilisation levels during January and February stood at 74.4 per cent and 77.6 per cent, respectively.
This artcle taken from mydigitalfc : http://www.mydigitalfc.com/news/steel-firms-expected-report-healthy-profits-615
On a year-on-year basis, net sales of steel companies are likely to improve due to increase in both volumes as well as prices. Margins are also likely to improve due to higher prices on a year-on-year basis. Tata Steel, JSW Steel, Steel Authority of India — all are expected to report healthy profits in the fourth quarter, experts said.
According to average estimates of three brokerages, Tata Steel is expected to report 24.2 per cent increase in its profits to Rs 1,099 crore, Steel Authority of India is expected to report 28.5 per cent increase in net profit to Rs 553 crore, and JSW Steel is expected to report 12 per cent increase in its net profit to Rs 354 crore.
Sanjay Jain, an analyst at Motilal Oswal, said, “We expect the profitability of steel companies to improve year-on-year. This is on account of higher prices, which were aided by rupee depreciation against the dollar.”
Steel prices declined sharply in the US and China while domestically the prices showed an upward move. The steel prices in US and China declined by 7.0 per cent and 4.5 per cent quarter-on-quarter. Indian steel companies had announced price hikes in October and November and hence prices rose by 5.6 per cent sequentially.
Spot coking coal prices continued to decline during the fourth quarter. Iron ore contract prices and spot prices have declined sharply during the quarter.
Global iron ore prices decreased during the quarter due to lower demand from China as inventories in China continued to pile up. During the quarter, average spot iron ore prices for 63.5 per cent Fe grade (CFR, China) decreased by 10.0 per cent sequentially $121 per tonne after weak Chinese economic data in the month of March. Hence, iron ore contract prices in the fourth quarter declined, said Bhavesh Chauhan, an analyst at Angel Broking.
Further lower steel imports during the year will help the companies to boost sales. Steel imports had risen by 15.3 per cent year-on-year in 2012-2013 to 7.9mn tonne as Indian steel players continued to face the threat of imports from FTA countries (which attract lower import duty). However, during April 2013-February 2014, steel imports by India have decreased by 31.1 per cent year-on-year to 5.0 million tonne on account of lower domestic demand and rupee depreciation against the dollar (which makes imported steel expensive vis-à-vis domestic steel).
A Prabhudas Lilladher analyst, declining to be identified, said, “Steel companies are expected to report strong performance in the quarter on back of lower coking coal and iron ore prices. Volumes have also improved due to focus in exports by steel companies in the quarter due to rupee depreciation.”
According to World Steel, global crude steel production decreased by 0.4 per cent to 130 million tonne in January, whereas it increased 0.6 per cent year-on-year to 125 million tonne in February. Global capacity utilisation levels during January and February stood at 74.4 per cent and 77.6 per cent, respectively.
This artcle taken from mydigitalfc : http://www.mydigitalfc.com/news/steel-firms-expected-report-healthy-profits-615
