The profit of JSW Steel, the third-biggest steel producer in the country, has plummeted for the second straight quarter on rising raw material costs. The profit fell 40.57 per cent to Rs 317.45 crore, despite a 58.46 per cent jump in net sales at Rs 4,269.21 crore.
The company’s raw material costs during the quarter has increased 116 per cent to Rs 2,860.06 crore. The company’s forex loss of Rs 268.35 crore has also crimped its profit, which recorded a Rs 75 crore forex gain in the corresponding quarter last year. The slide of the Indian currency against the US dollar has forced the company to revalue its overseas convertible bonds.
JSW Steel on July 31 reported a 52 per cent drop in first-quarter profit.
Surging costs of raw materials and a government-imposed ceiling on selling price have hit the company’s bottom line growth, Vice-Chairman and Managing Director Sajjan Jindal said. The firm’s operating margins also suffered, falling nearly 10 per cent, on surging input costs and marked-to-market losses.
To maintain profitability, JSW Steel, which buys over 55 per cent of iron ore from mines across India, will cut cost of production by Rs 10,000 per tonne, in the October-December quarter, Jindal said.
The company spent around $700 to produce one tonne of hot-rolled coil last year, which it aims to bring down to $500 in the third quarter, and still further by January, Jindal said.
The firm saw a mere 4 per cent rise in saleable steel, despite higher production, due to a slowdown in demand. Its inventory during the quarter stood at 200,000 tonne, up from an average 110,000 tonne in earlier quarters.
Fears of a demand slump due to a global market meltdown have sent the company’s shares into a tailspin, slipping nearly 50 per cent in July-September. The shares plunged as much as 10.95 per cent to Rs 205.35 on Friday. The stock has lost 84 per cent of its value this year, faster than the 56 per cent slump in the nation’s benchmark stock index.
After the fall in demand, the company has delayed its commissioning of the 3 million tonne per annum blast furnace at its Vijaynagar plant near Bellary by two months. The company plans to start production from the newly added capacity in a few months, said Jindal.
