Lower production at its primary Vijaynagar plant and foreign exchange translation losses of Rs 513 crore have pulled down JSW Steel's net profit by 71 per cent for the quarter ending September 30.

Net sales in the quarter have gone up 33 per cent, while crude steel production rose 11 per cent and saleable steel 19 per cent. EBITDA margins also saw a 2.5 per cent drop over the corresponding quarter.

“The last quarter was very challenging. The world economy has been slowing down, while the sentiment is also lower. Volume growth could have been much higher (if iron ore supply had been constant),” Mr Seshagiri Rao, Joint Managing Director, JSW Steel said.

He added that while cost of production rose by Rs 1,500 per tonne largely on more expensive sourcing of iron ore, the rupee in the quarter depreciated by almost nine per cent.

JSW Steel shares at the BSE fell 0.37 per cent to Rs 580.45 on Friday. The stock market had already factored in the drop in profits, according to sector analysts.

“If you exclude the forex loss, the profit was higher than the analyst expectations (of Rs 250 crore). It was difficult to judge the impact of Bellary as the rate of alternative sourcing of iron was not there. The outlook though remains dicey,” said Mr Bhavesh Jain, analyst at Angel Broking.

The company has also reduced the guidance on sales for 2011-12 by 14 per cent (lower by 1.25 MT to 7.5 MT) due to the lower availability of iron ore.

“We expected higher growth for the sector over last year, but are seeing single-digit growth in India. We are optimistic things will improve,” he said.

Prices

JSW Steel said that steel prices are expected to remain stable over the current third quarter, as margins for the sector look stable on a correction in iron ore and coking coal prices. In October, JSW Steel increased steel prices by 3-4 per cent.

The company also said that its Japanese partner JFE is “keen to pick up stake” in its West Bengal steel plant project, but no talks are on right now. JSW expects clearances on land and water for this project from the State Government shortly.

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