Markets

Rising costs dent JSW's sequential earnings

Adarsh Gopalakrishnan | Updated on July 26, 2011

2727bl_JSW.eps

Fuel and power charges up by a third to Rs 405 crore





The shares of JSW Steel ended the day's trade flat despite reporting stellar sales and profit growth of 54 and 64 per cent respectively during the quarter ended June, compared to the same quarter a year ago.

However, the market's enthusiasm seemed to have been dampened by a lacklustre sequential performance which saw the company's profits dip by around 30 per cent to Rs 578 crore. This was primarily due to a rise in operating costs and also a spike in interest charges.

The year-on-year growth was largely a result of the company reporting sales volumes much better than that registered during the same quarter a year ago. Even on a sequential basis, with steel prices holding steady and volumes at near-similar levels (1.7 million tonnes), the company's sales remained stable at Rs 7070 crore.

However, compared to the March quarter, profits were negatively impacted primarily due to the hike in coal prices coupled with higher interest outgo and employee expenses. Rising costs of thermal coal which the company utilises to generate captive power have been on the rise since the start of 2011 as domestic supply remains constrained and demand from geographies such as Japan have been higher than usual.

The company's fuel and power charges were up by a third to Rs 405 crore. Adding to the pressure was the increased interest outgo of Rs 196 crore (up by 29 per cent) on its Rs 16,400 crore debt pile (as on March 2011).

Besides, the company which recently commissioned an additional 3.2 million tonnes of steel-making capacity at Bellary saw its employee expenses rise by almost a third during the quarter compared to the preceding quarter.

Helping the company to some extent were stable costs of the company's main inputs — iron ore and coking coal.

Published on July 26, 2011

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor

You May Also Like