JSW to improve efficiency of US units

The management of JSW Steel is focussing on improving the efficiency and profitability levels of the three companies it acquired recently in Texas, US.

The company's senior management said is aiming to achieve an aggregate EBITDA (earnings before interest, tax, depreciation and amortisation) of $30 million (Rs 120 crore) in the March 2008 quarter from the companies.

When the acquisitions were announced, the three companies reported a collective EBITDA of $75 million (Rs 300 crore) on a turnover of $510 million, between July 2006 and June 2007.

The companies had low operating margins due to erratic supply of key inputs and low utilisation levels, said analysts.

To achieve the planned efficiency during the March quarter, JSW Steel has started supplying slabs from its facilities in India.

The slabs are then converted into higher value products such as plates and pipes for the US oil and gas industry.

At its pipe mill in the US, the company has ramped up utilisation levels to about 51 per cent post-acquisition, compared with 39 per cent during the 12-month period between July 2006 and June 2007.

The acquisitions were for an enterprise value of approximately $900 million. Meanwhile, in its domestic operations, the company is focussed on increasing its captive supply of key raw materials such as iron ore and coal.

As part of the strategy, JSW Steel recently entered into a joint venture with Chile-based Minera Santa to develop iron ore mines and other projects in South America, including Chile. JSW Steel holds 70 per cent stake in the joint venture.