Operating margins of steel makers to fall by 200 basis points this fiscal: CRISIL
New Delhi: The operating margins of primary steel makers in the country are set to fall by 2 percentage points or 200 basis points to around 15 percent in the current fiscal. This will be because of lower sales volume and realization as there is very limited scope of lower raw material prices.
Many companies have deferred capital expenditure in the current fiscal. There is a demand recovery expected next fiscal which will support credit profiles of the companies, according to research paper by CRISIL.
The decline sales volume of steel in the current fiscal is expected in “high single digit” as compared to last fiscal. This will be majorly due to domestic demand vanishing in the in the first quarter(April-June) as there were lockdowns in the country.
However, the steel makers in the country will still be better-off this fiscal than they were in the last downturn of financial year 2015-16 as the imposition of anti dumping duty and even resolution of the stressed assets have supported their debt metrics.