* Q2 net 4.95 bln rupees vs 8.6 bln forecast
* High input costs, coal prices hit profit-chairman
* Demand to rise in FY12, no dip in prices-chairman
* Shares fall as much as 4.8 pct
(Adds quotes, details)
By Anurag Kotoky
NEW DELHI, Nov 3 Steel Authority of India Ltd
(SAIL), the country's largest domestic steel producer,
blamed a halving of quarterly profit on rising costs and a
strong dollar on Thursday, and maintained demand would rise
during the rest of the fiscal year.
The state-run steelmaker's profits sharply missed
market estimates for the second successive quarter, but the firm
is bullish on increased demand and stable steel prices looking
forward, despite a gloomy global scenario.
"There is definitely going to be a rise in demand in the
second half (of this fiscal year)," SAIL Chairman C.S. Verma
told reporters after the results announcement.
"Steel prices have globally come down. They have been
relatively stable in India...I don't foresee a further dip in
Steel demand in India is rising at close to double digits,
but outlook for steelmakers across Asia is mixed as firms feel
the strain an uncertain global economy and slowing demand in
China, the world's biggest consumer of the alloy.
Japan's two biggest steelmakers Nippon Steel Corp
and JFE Holdings Inc slashed their profit outlook last
week and POSCO , the world's third-biggest steelmaker
cut its 2011 investment plan.
Last month, forecaster World Steel Dynamics pared its
production outlook for 2011 to 1.520 billion tonnes, from a
previous forecast of 1.535 billion tonnes.
SAIL said it spent 56.08 billion rupees ($1.14 billion) on
raw materials during the quarter, a rise of 7.29 billion from a
year ago, mostly on account of higher imported coal costs.
SAIL imports 75 percent of its coking coal requirement and a
significant portion of that is from Australia.
India holds 10 percent of the world's coal reserves but
local supplies are falling short of demand as the country builds
more power plants, and as domestic projects run into
environmental and land acquisition delays.
Indian firms have spent $10 billion this year on overseas
mines. The country's aluminium-to-cement Aditya Birla Group is
considering bidding for Australia's New Hope Corp , a $5
billion coal mine, sources said this week.
SAIL said its net profit in July-September, its fiscal
second quarter, fell to 4.95 billion rupees ($100.6 million)
from 10.60 billion rupees a year ago. Net sales rose 3.6 percent
to 109.80 billion rupees.
A Reuters poll of 10 brokerages had estimated net profit for
the quarter at 8.6 billion rupees on net sales of 112.7 billion.
A stronger dollar resulted in a notional loss of 5.09
billion rupees ($118.7 million) during the quarter, the company
said in a statement.
SAIL, with annual capacity of about 15 million tonnes, is
the largest steel producer in India, but lags Tata Steel's
global capacity of about 28 million tonnes.
The steelmaker plans to spend just under $3 billion in the
current fiscal year ending March on capacity expansion projects
as part of a programme to swell total capacity at its five
integrated plants to 21.4 million tonnes by March 2013.
The impact of higher costs was partially offset by higher
sales volumes, and an increase in net sales realisation to
36,230 rupees ($737) per tonne during the three months to Sept.
30 from 31,320 rupees a year previously, Verma said.
SAIL shares closed down 2.7 percent 109.75 rupees on
Thursday, having recovered from a fall of 4.8 percent after the
results, in Mumbai market that ended up 0.1 percent.
The stock, valued by the market at $9.4 billion, has
declined 39.9 percent so far in 2011, compared with a roughly 15
percent fall in the main stock index .
($1 = 49.185 Indian Rupees)
(Additional reporting by Prashant Mehra in MUMBAI; Writing by
Henry Foy; Editing by Aradhana Aravindan)