Mumbai: JSW Steel Ltd, India’s No. 3 producer of the alloy, posted a better-than-expected jump in July-Sept. net profit led mainly by sales of flat-rolled products and a change in sales mix to tackle rising costs.
The jump in sales of flat-rolled products was mainly due to additional production from the phase-I of its new mill at Vijayanagar, which started commercial production on 10 April.
JSW’s consolidated net profit during the quarter rose 16.6% to Rs364 crore from Rs312 crore a year earlier, beating a Thomson Reuters consensus forecast of Rs303 crore.
JSW Steel, in which Japan’s JFE Holdings Inc holds a 14.61% stake, sold 1.22 million tonnes of flat-rolled products during the quarter, compared with 870,000 tonnes a year ago.
Total sales of steel rose 8.8% to 1.58 million tonnes.
The company said it changed its product mix by reducing sales of cast products to cushion the impact of rising costs.
“Cost in this quarter has gone up by 27%, compared with last year,” Group chief financial officer M.V.S. Seshagiri Rao said. “We tried our best to absorb this cost by changing sales mix, improving volumes and reducing interest cost.”
Realization of sales has failed to keep pace with the growth in sales volumes, he added.
Indian steel makers had raised prices in September and October due to firm global rates and rising input costs. They had also indicated the rates would be on an uptrend going forward.
Rao said he expects steel prices to be weak in the coming months on global cues and the rupee’s appreciation.
JSW’s crude steel output grew about 8% in the first half of FY11 to 3.14 million tonnes. In July-September, the company produced 1.57 million tonnes of crude steel.
The firm, which is aggressively expanding, expects capacity to touch 10 million tonnes by March 2011, after the first unit at its new plant in Karnataka becomes fully operational by February.
Its board has approved setting up of a steel plant in the eastern state of West Bengal with a capacity of 4.5 million tonnes per annum at an estimated cost of Rs16,000 crore, the company said. It plans to commission the project by March 2014.
JSW Steel expects its US unit, which was suffering losses due to poor demand and the economic downturn, to turn around by next year, as the company wins newer projects, Rao said.
In contrast, Asia’s steel sector faces a murky outlook due to slower growth from China, the world’s biggest steel consumer.
Asia’s steel sector has seen share prices slide by 11% so far this year with large markets China and Japan among the biggest losers. Indian steelmakers have outperformed its Asian peers -- their share prices have risen 3.4%.
Shares of the company closed down 0.96% at Rs1,225.45, while the larger market ended down 0.40%.