JSW Steel posted a net loss of Rs 116 crore in the latest September quarter, but the company seems to be set for better times ahead. The quarter’s loss came mainly from a foreign exchange loss of Rs 851 crore from suppliers’ credit and short-term borrowings due to the fall in the rupee. But such short-term losses are unlikely to recur with the company now completely hedged against currency fluctuations.

JSW Steel remained profitable at the operating level, with an operating profit margin of 18.1 per cent for the September quarter, almost unchanged from the previous quarter. Standalone margins improved. But the overseas subsidiary, JSW Steel USA Plate and Pipe Mill, was a drag on the consolidated performance.

The company reported a strong increase in sales revenue (up 26 per cent) to Rs 12,796 crore. While the realisations per tonne of steel remained sequentially flat, saleable steel volumes rose 22 per cent (including JSW Steel Coated Products) for the quarter ended September 2013. The contribution of exports, which offered better returns due to the fall in the rupee, rose to 27 per cent of total sales.

With the gradual resumption in iron ore mining operations in Karnataka (they were at a standstill following the Supreme Court-imposed ban in 2011) input costs eased. Another positive was a fall in global prices of coking coal, which is imported. Efficiency initiatives including the commissioning of a waste heat recovery system and blast furnace gas utilisation at the company’s Vijayanagar plant in Karnataka too helped.

What’s ahead

JSW Steel’s numbers in the coming quarters may be aided by improving domestic steel demand, which grew at a modest 1.3 per cent this quarter. Boost to rural spending following a good monsoon, festive demand and a pick-up in construction activity after monsoons are a few triggers. Globally, growth is recovering with the World Steel Association upping the demand growth forecast to 3.1 per cent for 2013.

But on the flip side, though iron ore availability has improved, the resumption of mining operations has not been swift. Capacity expansions at the company’s Vijayanagar plant too have been held up because of this. There are some positives though. JSW Steel, which had submitted a bid to acquire British firm Stemcor’s assets including iron ore mines in Odisha, has been shortlisted for the final bidding. It also plans to bid for the Category C mines (mining leases of which were cancelled) when they are auctioned by the Karnataka government. These initiatives, if they take off, could shore up captive iron ore availability and expand JSW Steel’s margins.

> maulik.tewari@thehindu.co.in

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