International Steels Limited

International Steels Limited (ISL) announced its 9M FY14 results yesterday boasting an almost five-fold increase in the bottom line.
Subdued demand in the international market owing to slowdown of Chinese economy and structural issues of the emerging economies led to softening of international steel prices. That resulted in better gross margin for ISL. During 9M FY14, the gross margin of ISL grew to 11 percent from 9 percent in the corresponding period of FY13.
Net sales grew by a staggering 25 percent year on year in 9M FY14. If the earlier financial statements are any guide, galvanized steel products have the highest share of over 60 percent in the total sales-mix of ISL while the rest is cold-rolled steel products. Both the products are sold to commercial and industrial customers--domestically and internationally.
Sales growth is expected to have come from domestic sales owing to improving macroeconomic indicators and growing infrastructure activities in the country. Export sales, on the other hand, might have taken a breather as the drop in the international steel prices call for price reduction in the steel products internationally. Besides, stable rupee is a disincentive for exports.
Selling and distribution charges almost doubled in 9M FY14 while financial charges inched down a tad. Other income also dropped during the period. Income from power generation, the prime source of non-core income for the company is not performing well since FY13 owing to continuous gas curtailment by the SSGC.
Going forward, the steel industry pins hopes on the anticipated private and public infrastructure projects in the country. However, competition from ship-breaking industry and smuggled steel remains the major hitches to the sector, pleading reforms.

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International Steels Limited

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Rs(mn)                           9MFY14    9MFY13     chg

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Net Sales                        15,169    12,170     25%

Cost of Sales                    13,527    11,102     22%

Gross Profit                      1,643     1,068     54%

Administrative expenses             102        81     25%

Selling & distribution expenses     104        56     85%

Financial charges                   737       781     -6%

Profit before Taxation              655       170    286%

Profit for the period               546       109    399%

EPS (Rs)                           1.26      0.25

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