The Hindu Business Line : High input costs bring JSW Steel Q3 net down 9%

Mr Sajjan Jindal, Vice-Chairman and Managing Director, JSW Steel Ltd, and Mr Y. Siva Sagar Roa, Joint Managing Director & CEO, Vijaynagar Works, at a press conference in Mumbai on Monday.

Our Bureau

Mumbai, Jan. 28 Hit by high input costs, JSW Steel has registered a 9.38 per cent dip in net profits at Rs 328 crore for the quarter ended December 31, 2007 as against Rs 362 crore logged for the same period a year ago.

The company said the cost of iron ore and imported coke went up by 75 per cent and 57 per cent, compared to the corresponding quarter of last year.

Mr Sajjan Jindal, Vice-Chairman and Managing Director, said by achieving further efficiencies in yield and other operational parameters such as fuel consumption, fluxes consumption and power consumption, besides an increase of four per cent in realisation helped neutralise the cost impact to a certain extent.

Operating profits fell by 6.32 per cent to Rs 727 crore (Rs 776 crore) for the quarter under review. Total sales went up by 12 per cent to Rs 2,563 crore as against Rs 2,301 crore. Total income went up 12.58 per cent to Rs 2,598 crore (Rs 2,307 crore).

Interest costs

Mr Seshagiri Rao, Director-Finance, said interest cost were lower by 14 per cent at Rs 95 crore (Rs 110 crore) relative to the corresponding quarter of last year as the company reduced its weighted average cost of borrowings to 7.73 per cent as on December 31, 2007 (8.14 per cent on March 31, 2007).

The company has commissioned a one million tonne per annum CR (cold roll) complex in September 2007 and produced 30,590 tonnes from the Pickling line and 12,506 tonnes from cold rolling mill during the quarter.

A 2.8 MTPA expansion project to increase overall capacity to 6.8 MTPA is on fast track and will be commissioned in phases in the calendar year 2008.

IPO plan

As there are certain practical difficulties in separating the 300-MW facility from the total integrated 600-MW capacity of JSW Energy Vijayanagar Ltd, for creating security in favour of lenders after acquisition, the Board decided not to pursue the acquisition.

However, to meet the entire requirement of power, it has been decided to set up another 300-MW power plant at a cost of Rs 825 crore, to be financed by way of debt of Rs 550 crore and balance out of cash accruals.

The company had announced establishing a steel plant with an annual capacity of 10 MTPA in phases in West Bengal. The company has made significant progress in acquiring the land, tying up critical raw materials.

Considering, the progress achieved, the Board has decided to set up a 6 MTPA integrated steel plant through its subsidiary JSW Bengal Steel Ltd at an estimated cost of Rs 15,000 crore to be raised by way of equity Rs 5,000 crore and debt Rs 10,000 crore in JSW Steel Bengal Ltd.

JSW Steel Ltd will invest around Rs 1,000-1,500 crore and the balance amount will be raised at an appropriate time by way of an initial public offering. This project is expected to be commissioned mid-2011.

Outlook

The strong demand and the soaring input cost led to a sharp rise recently in the finished steel prices.

The negotiations for revision in long-term prices for iron ore and coal for 2008 indicate that there will be a sharp rise in these prices too. With this backdrop, it is expected that new highs will be seen in the steel prices in 2008.

On Monday, the company’s stock on the BSE closed at Rs 947, down 2.10 per cent over the previous close.