Shares of metals manufactures were amongst the worst performers during the April to June 2012 period. This is because these companies are likely to show a sequential decline in performance on account of the increasing challenging macro economic environment high interest rates, contraction in industrial production and sharp fall in the value of the rupee.

Sales growth for these companies is expected to remain low. In an environment of slowing growth, demand from users of raw materials like steel and other industrial metals remains weak. This leaves very little room for metals producers to increase prices.

Operating profit margins, which improved sequentially during the January to March 2012 quarter, are expected to contract again as the cost of production has increased during the quarter.

The prices of commodities like coal and iron ore, key steel making ingredients, have fallen significantly during the quarter. But due to the sharp fall in the rupee steel manufacturers will not gain much from the drop in input costs.

Source - Economic Times

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