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JSW Steel Q4 net jumps 30% on higher realisations

JSW Steel Q4 net jumps 30% on higher realisations
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First Published: Mon, May 16 2011. 05 15 PM IST
Updated: Mon, May 16 2011. 05 15 PM IST
Mumbai: JSW Steel on Monday posted a 30% rise in net profit for the quarter-ended March, helped by higher realisations, and said it is further augmenting capacity.
India’s No. 3 steelmaker, which recently bought a controlling stake in Ispat Industries , expects capacity to touch 14 million tonnes, including Ispat, by next month.
The firm said it expects FY12 saleable steel output to jump 48% to 9 million tonnes.
JSW Steel plans to expand its facility at Vijayanagar to 12 million tonnes per annum from the current 10 million tonnes, it said. The expansion, which will cost Rs 2,695 crore, would be funded by cash accruals to the extent of Rs 9,450 crore and rest via debt.
The company has already raised funds in foreign currency syndicated loans for the project, M.V.S. Seshagiri Rao, the joint managing director and group chief financial officer, said.
The firm has a debt to equity ratio of 0.57 : 1 on a standalone basis.
JSW Steel, which has earmarked capex of 80 billion rupees in FY12, said it plans to raise Rs 10,600 crore via debt for unit JSW Bengal, during the fiscal.
The company, which competes with SAIL and Tata Steel , posted a net profit of Rs 7,940 crore, compared with Rs 6,110 crore a year ago.
Net sales rose 32.5% on higher production after the firm posted a 3% jump in crude steel output in the period led by capacity expansions.
Sales of total saleable steel rose 14% to 1.73 million tonnes during the quarter.
As many as 23 of the 38 analysts tracking the firm have a ‘buy’ or a ‘strong buy’ rating on the company with nine rating it a ‘hold’. Six analysts have an ‘underperform’ or ‘sell’ rating.
Cost pressures may crimp margins
Sajjan Jindal, managing director, said higher raw material prices are likely to keep margins pressurised during the June quarter.
Director Jayant Acharya said coking coal prices have risen to $330 per tonne now fron $225 in the Jan-March period on an average. Iron ore prices have risen by $50 per tonne compared with last year and this will likely impact profit marings.
“This will hit us in April-June and July-Sept. Iron ore prices have also gone up and steel prices have accordingly reacted to this,” Acharya said.
“Going forward, we expect steel prices will continue to react.”
However, Rao said higher production at JSW will partially offset the impact on margins.
The global steel sector, seen as a barometer of the broader economy’s health, is facing a margin squeeze on record output from China and stubbornly high prices of iron ore and coking coal. Recent supply disruptions due to floods in Australia, a leading exporter to global markets, drove costs higher.
Domestic steel companies have raised prices by Rs 5,000-6,000 a tonne during the quarter on the back of good demand and rising raw material prices, Emkay Research said in a note.
Japan’s JFE Holdings , the world’s No. 5 steelmaker, holds just a shade under 15% in JSW.
JFE reported a 67% fall in quarterly profit after the 11 March earthquake curtailed shipments. The firm provided no outlook for the current financial year.
Shares of JSW Steel, which the market values at $4.64 billion, closed down 1.42% at Rs 922.50 rupees in a weak Mumbai market.
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First Published: Mon, May 16 2011. 05 15 PM IST