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A weak rupee combined with a decline in steel prices pushed JSW Steel into net losses in the quarter ended June 2013. The company reported a consolidated net loss of Rs 382 crore. A forex loss of Rs 862 crore on account of restatement of suppliers’ credit, weighed on profits.
The company merged JSW Ispat into itself with effect from June 1. This makes it difficult to compare the latest quarter’s numbers to the same quarter last fiscal. After adding JSW Ispat, JSW Steel’s net sales revenue grew a meagre 2.3 per cent. This is, however, not surprising given the fall in steel prices.
Based on the pro forma numbers provided for comparison by the company, both crude steel production and steel sales (on a standalone basis) remained flat year-on-year.
Steel sales have been hit by a slowdown in demand. Indian steel demand grew 0.3 per cent year-on-year, this quarter.
JSW Steel’s 10 million tonnes (mt) Vijayanagar plant in Karnataka has been operating below capacity on account of shortage of iron ore which followed the Supreme Court imposed ban on mining in 2011.
Continued poor performance of the loss-making subsidiary JSW Steel (US) — plate and pipe mills (net loss of $13.7 million) — was a major drag this quarter on the consolidated numbers.
Impacted by the challenging economic environment, the already low capacity utilisation levels at the respective mills tumbled down to 35 per cent and six per cent respectively, this quarter.
OUTLOOK
Apart from the rupee, one factor that will have significant impact is the availability of iron ore. Though the ban on mining in category A and B mines has been lifted, many are yet to start operating as they await statutory approvals. According to Seshagiri Rao, Joint Managing Director and Group CFO, given the slow pace of the process, it is not clear when the supply situation will improve. The company is on the path to increasing the production of value-added steel products which offer higher margins. According to Rao, the company is relying not only on a pick-up in domestic demand, but is looking at overseas markets to sell these products.
> maulik.tewari@thehindu.co.in
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