SAIL Q3 slides 43 pct, sees demand firming

By Devidutta Tripathy

NEW DELHI (Reuters) - Steel Authority of India Ltd (SAIL), the country's largest domestic steel producer, remained bullish on demand and prices in Asia's third-largest economy despite posting a worse-than-expected 43 percent slide in quarterly profit.

The state-run steelmaker, which blamed rising coal costs and foreign exchange losses for its sharply lower profits, said it expected demand from the construction and auto sectors to firm up in the current quarter.

"Demand is firming up. Especially demand of the long products is very good, I will say ... This quarter is going to be a brisk quarter," SAIL Chairman C.S. Verma told reporters at a press conference after announcing its results.

Global crude steel production in 2012 is expected to grow at a much slower pace than in the previous year, the World Steel Association said, as the sovereign debt crisis in Europe and slowing economic growth in top consumer China dents demand.

Steel demand in India has also suffered this fiscal year, with economic growth likely to decline below 7 percent in 2011/12, the slowest pace since the 2008 financial crisis, because of the central bank's inflation-fighting campaign and government gridlock.

Rival Tata Steel , the world's No.7 steelmaker, posted its first quarterly loss in more than two years last week, while JSW Steel posted a bigger-than-expected 56 percent fall in quarterly profit.

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 28 million tonnes.

HIGHER COSTS, FOREX LOSS

SAIL said its net profit in October-December, its fiscal third quarter, fell to 6.32 billion rupees from 11.07 billion rupees a year earlier. Net sales fell 4.9 percent to 105.94 billion rupees.

A Reuters poll of brokerages had estimated an average net profit of 8.3 billion rupees for the quarter on a net sales of 115.3 billion.

SAIL said its profit was lower by 4.75 billion rupees because of the combined impact of higher coking coal prices and foreign exchange loss.

The company, which imports 75 percent of its coking coal requirement, suffered foreign exchange loss of nearly 5 billion rupees on account of volatility in the dollar. The Indian rupee fell nearly 8 percent against the dollar during the quarter.

Higher prices of coking coal added 5.78 billion rupees to SAIL's costs over the year earlier period, the company said.

The steelmaker is in the process of raising capacity to 19 million tonnes by March 2014. It plans to spend 145 billion rupees on capital expenditure during the fiscal year that starts in April 2012, Verma said.

It will borrow about 70 billion rupees in 2012/13.

The company, which deferred an up to $780 million share sale last June because of unfavourable market conditions, will consider reviving the public offer only next year, if market conditions improve, Verma said.

SAIL shares closed down 2.6 percent at 110.30 rupees in a Mumbai market that ended up 0.1 percent. The stock, valued by the market at $9.5 billion, has risen more than 35 percent thus far in 2012, compared with a roughly 15 percent increase in the main stock index.

(Writing by Prashant Mehra; Editing by Rajesh Pandathil)