Reeling from the iron ore shortage and foreign-exchange losses, JSW Steel on Friday posted a 71.5 per cent drop in its second quarter net profit at Rs 127.1 crore as against Rs 445.4 crore year earlier.
The steelmaker's net sales grew to Rs 7,625.1 crore against Rs 5,712.8 crore in the corresponding quarter last year. Expenditure also grew from Rs 5,116.2 crore to Rs 6,739.9 crore. The company reported a foreign exchange loss of Rs 512.98 crore in the July-September quarter.
Seshagiri Rao, the joint managing director and group CFO, said, "The iron ore supply was severely impacted from July 29. In spite of this, our production volumes went up 11 per cent and sales rose by 19 per cent in the second quarter." The company commissioned its 3.2 million tonne blast furnace in July, which took its total installed capacity to 11 million tonnes. Rao said that the forex loss of Rs 512.98 crore has been on the account of rupee depreciation (nine per cent) and the higher cost of production (Rs 1,500 per tonne) due the shortage of iron ore.
The company, whose board on Friday appointed Sajjan Jindal as its chairman after his mother Savitri Devi stepped down, has been liquidating its inventories to meet the customer demands. Jayant Acharya, director (sales and marketing), said, "We have 15-20 days of inventory left. This is typically low inventory level as we have been liquidating it in the quarter to meet the obligations."
The concern over mining iron in Karnataka's Bellary district has affected the company. JSW said it has lost nearly half a million tonne production in the second quarter due to the unavailability of iron ore. The Ebitda (earnings before interest, taxes, depreciation, and amortisation) margin for the company dropped by 2.5 per cent.
Rao said during the e-auctions last month, the company secured 1.9 million tonnes of ore which translates to around 38 days of steel production. He, however, blamed the transportation and logistical delays in getting the ore. "We have got only 18 per cent of the ore at the plant so far. There are procedural and logistic delays in getting the ore," he said.
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Due to the iron ore issue and the loss of production, JSW has trimmed its yearly production and sales guidance by 14 per cent. Earlier in the year, it had predicted production of 8.75 million tonnes of steel and sales of nine million tonnes.
"Because of the ore issue in the first and the second quarter, we managed to produce only 3.42 million tonnes. Therefore, we now feel that we will produce 7.5 million tonnes and 7.8 million tonnes in sales," he said.
The capacity utilisation, which had dropped as low as 30 per cent earlier in the month, is now at 50-60 per cent.