2021-08-07 09:52:30
SAIL 1QFY22 Result Quick Take: Volumes disappoint while debt reduction surprises
Event: SAIL (SAIL IN, Equity) reported 1QFY22 results with EBITDA at Rs 65.6bn (+7% qoq) and was 11% lower than EE of Rs 73.8bn due to miss in volumes which declined 24% qoq to 3.33mt (average industry declined 12-15% qoq). Despite negative operating leverage, SAIL’s EBITDA/t increased 39% sequentially to Rs 19,728/t driven by a Rs 8,514/t sequential growth in realisations (which was aided by iron ore sales also). Biggest positive was reduction in gross debt which declined by Rs 51bn during the quarter.
Volume: SAIL crude steel production declined 17% qoq to 3.77mt (as oxygen was diverted to hospitals) while sales declined by 24% to 3.33mt and was below our estimates of 3.6mt.
Realisation: Realisations improved 16% qoq to Rs 62,045/t (+8,514/t qoq, +3% above EE) driven by higher steel prices and was higher than our estimates implying improved product mix and higher sales of iron ore.
EBITDA: EBITDA increased 7% qoq to Rs 65.6bn with profitability rising to Rs 19,728/t vs EE of Rs 20,502/t. EBITDA/t missed estimates mainly due to negative operating leverage as lower volumes resulted in lower fixed cost absorption on a per tonne basis. (Adjusted employee expense increased by Rs 1,880/t and other expense increased by Rs 3,600/t). With steel prices still at similar levels as 1QFY22 and with higher volumes expected in balance of the year, we believe higher coking coal costs would be offset by operating leverage itself.
Debt: The company reduced gross debt by Rs 51bn during the quarter while the company was sitting on Rs 6.8bn cash as on end-FY21 implying a strong debt reduction despite increase in working capital due to lower sales.
Concall: The company is hosting earnings call on 7th Aug’21 at 11.30am. Dial in numbers are +91 22 6280 1384/ +91 22 7115 8285.
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