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JSW Steel Q3 net drops on higher production cost

JSW Steel Q3 net drops on higher production cost
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First Published: Thu, Jan 27 2011. 04 53 PM IST
Updated: Thu, Jan 27 2011. 04 53 PM IST
Mumbai: JSW Steel Ltd, India’s No. 3 steel maker, said on Thursday its consolidated net profit dropped 32%, hurt by higher cost of production, sending its shares down as much as 5.5%.
The company, which recently agreed to buy a controlling stake in loss-making rival Ispat Industries, posted a net profit of Rs292 crore, compared with Rs430 crore a year ago.
“Price realizations have not risen with rising input costs,” M.V.S. Seshagiri Rao, the joint managing director and group chief financial officer, said.
“In spite of cost pressure, due to higher volumes and change in product mix, we have posted a profit,” he added.
Net sales rose 26% to Rs5,771 crore as crude steel production jumped 11%.
The company expects to produce 1.7 million tonnes of steel in the March quarter, compared with 1.64 million tonnes in the December quarter, Rao said.
Rising Costs
Earlier this month, rival Steel Authority of India Ltd (Sail), the country’s largest steel producer, posted a 34% drop in quarterly net profit, while Tata Steel Ltd said it sees third-quarter operating results declining due to higher raw material prices.
Price of coking coal, a key raw material for the steel industry, has almost doubled to $205 per tonne from $128 per tonne a year ago.
JSW Steel’s annual coking coal requirement is under 5 million tonnes and it expects that to rise to 7 million tonnes in FY12 on higher production.
“There is increased cost push, so there is a case for a revision in Jan-March. We will take a call in February,” director Jayant Acharya said.
He expects steel demand to increase in the Jan-March quarter.
“We saw low levels of inventory, but now we are seeing a good amount of stocking, so there would be higher demand in Jan-March,” Acharya said.
In a separate statement, JSW Steel said it has acquired assets of Bellary Steel & Alloys Ltd for Rs210 crore.
The company also plans to set up a 2.3 million tonne cold-rolling mill complex in Karnataka by the first quarter of FY15. The company said it will invest Rs4,025 crore in this project.
Shares of the company, which the market values at $4.96 billion, fell as much as 5.5% to Rs960.60. They closed down 5% in a weak on the BSE.
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First Published: Thu, Jan 27 2011. 04 53 PM IST