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Higher sales volumes and an increase in product prices have boosted JSW Steel's net profits by 65 per cent for the quarter ended June 30, 2011.
Net sales in the period rose 52 per cent.
Mr Seshagiri Rao, JSW Group CFO and Joint MD, said that the industry is witnessing sluggish growth on the back of a dip in steel demand from sectors such as auto. However, demand from rural areas is strong and is projected to increase in the next few quarters.
“We're working to reduce the cost of production and preserve margins by changing the product mix. In order to manage costs, we're also changing the raw material mix between iron ore fines and lumps,” he said.
While production rose 7 per cent in the quarter to 1.68 million tonnes, the company sold 44 per cent more steel at 1.71 million tonnes. In the same period last year, it has sold 1.19 million tonnes.
On a consolidated basis (which includes overseas subsidiaries), JSW Steel's profits rose 64 per cent to Rs 485 crore, while the net sales increased 54 per cent to Rs 7,995 crore. JSW's consolidated debt has come down by Rs 160 crore in the quarter to Rs 16,308 crore.
“The order book is now looking better in the current quarter over the first quarter. Overseas operations have started showing returns. We expect significant volume growth this quarter and expect to produce 8.75 million tonnes this fiscal,” Mr Rao said, adding that capacity utilisation is about 85 per cent.
JSW's iron ore mines in Chile have started operations, with exports of 0.19 million tonnes in the quarter. The company is adding 2 million tonnes per annum (MTPA) to its 10-MTPA steel plant in Vijaynagar.
Mr Rao said that the company expects to finish the re-financing plans for JSW ISPAT within the next few weeks. It has acquired a controlling stake in the company last year. JSW Steel is also completing the financing plan for its new steel plant in West Bengal.
“The current assets are not enough for JSW's growth plans. We're looking to acquire more mining assets,” he said.
Asked for an outlook on steel prices, Mr Jayant Acharya, Director, Commercial & Marketing, JSW Steel, said that prices are expected to be stable for a month, but may go up from September as demand picks up.
JSW Steel shares on the BSE were up 0.13 per cent to close at Rs 870.35 on Tuesday.
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