Hit by slump in steel demand and the consequent fall in prices, the country’s largest steel producer SAIL on Tuesday reported a 56 per cent decline in its net profit to Rs 843 crore for the third quarter ended December.

The state-run entity had a net profit of Rs 1,934.66 crore in the December quarter of FY ’08.

Besides slump in demand and prices of the commodity, what hit the Navratna PSU’s bottom line was the sharp rise in input costs, especially of coking coal, SAIL Chairman S K Roongta said.

“The adverse impact on account of higher prices of coking coal alone amounted to approximately Rs 2,641 crore,” he said.

Selling at USD 96 a tonne last year, the coking coal prices have touched USD 300 (FOB) a tonne under long-term contracts in the international market. Coking coal is a vital raw material in steel-making.

As demand from sectors like automobiles and construction declined in the midst of the global economic slowdown, SAILsaw its sales volume dipping by about 20 per cent to 2.4 million tonnes. Its production too registered a decline of 7.5 per cent to 3.02 million tonnes.

To offset the impact of the fall in demand for the commodity, Roongta said SAIL had aligned its products mix and value-added products account for 40 per cent of its total production.

The steel major reduced using imported coking coal by six per cent and subsequently increased the raw material’s efficiency by improving coal dust injection by 14 per cent.

“Major savings could be effected on account of improvement in techno-economic parameters like reduction in the coke rate by over two per cent and energy consumption by four per cent, resulting in savings of about Rs 275 crore,” Roongta said.

source: yahoo finance.

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