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JSW Steel Reports Highest-Ever Production Volume for Q3 FY 2011-12
01/23/2012 - JSW Steel Limited reported the production of 1.939 million tons of crude steel, the company’s highest-ever quarterly volume of production, as well as highest-ever quarterly sales volume of 1.908 million tonnes of steel in the third quarter of FY 2011-12.
JSW Steel Limited reported the production of 1.939 million tons of crude steel, the company’s highest-ever quarterly volume of production, as well as highest-ever quarterly sales volume of 1.908 million tonnes of steel in the third quarter of FY 2011-12.
Compared to the third quarter of the previous year, the company’s production volume represents a 19% increase for crude steel, 11% in rolled flat products and 31% in rolled long products. Third quarter sales volume reflects 20% growth over sales for the third quarter of the previous year.
The company also reported EBIDTA of Rs. 1253 crs, Profit after tax of Rs. 168 crs, and diluted EPS of 7.18.
During the initial phase of e-auctions, the company faced severe shortages of iron ore at the plants due to procedural delays and logistical constraints even after the ore had been secured in e-auctions. The company bought iron ore in the e-auctions although the ex-mine price for various grades of ore did not reflect drop in international Platts Index prices, which led to under-utilization of production capacity during the quarter. Gradual improvement in the receipt of e-auctioned material at plant enabled the company to increase capacity utilization to 84% in December 2011.
The company expects continuing steel production to be a challenge if the iron ore mining ban continues in the State of Karnataka.
Capital Projects — The company completed a 3.2 mtpa expansion project at Vijayanagar in the third quarter, comprising a 171 km water pipe line from the Alamatti Dam to Vijayanagar works. In another project, the company has commissioned three of seven modules in its Beneficiation plant, and the remaining four modules, which are undergoing advanced commissioning and implementation, are to be fully commissioned by the end of September 2012.
Additional projects currently underway include
· Expansion of annual capacity at Hot Strip Mill 2 - phase II, from 3.5 to 5 million tonnes, which is to be completed by September 30, 2012.
· 300 MW CPP plant is expected to be commissioned by March 31, 2012.
· Upgrade and expansion of annual capacity at Cold Rolling Mill 2, from 10 to 12 million tonnes, is progressing and is scheduled to be completed by FY 2013-14.
Amba River Coke Limited (ARCL) — JSW Steel is setting up a coke plant, pellet plant, and cold rolling mill projects in Amba River Coke Limited (ARCL), a wholly owned subsidiary of the company. These projects would be set up at JSW Ispat Steel Limited’s Dolvi Works as a part of cost reduction and integration initiatives at JSW Ispat Steel. The company said the coke oven and pellet plants will improve profitability and the cold rolling mill will enable the company to increase the facility’s share of value added products from its current level of approximately 10% to up to 25-30%.
ARCL has obtained environmental clearance for setting up the coke oven plant, and the Board of Directors has approved the acquisition of 100% holding in ARCL, which will set up coke batteries capable of annual production of 1 million tonnes, at a total project cost of Rs.975 crores with equity of Rs.325 crores with the balance raised by way of debt in SPV (ARCL) without any guarantee from JSW Steel Limited. Coke will be supplied to JISL under long term take-and-pay contract with a return on equity of 25% to the company. This project is expected to be on stream by December 2013.
A pellet plant with an annual capacity of 4 million tonnes has also been proposed along with a 0.8 million tonnes/annum cold rolling mill complex. The pellet plant, which represents an estimated project cost of Rs.835 crores, and CRM complex, representing an estimated project cost of Rs.330 crores, would be financed through debt-equity ratio of 2:1. These projects will be taken up for implementation on receipt of requisite clearances and will be commissioned in FY 2013-14.
Outlook — The company noted that continuing uncertainty in resolving the sovereign debt crisis in Euro zone, slow but improving economic activity in U.S., and hawkish monetary stance adopted by emerging economies to contain inflation have slowed down overall international economic growth for calendar year 2011.
The company believes that the possibility that European leaders will find a solution to the sovereign debt crisis could revive the situation. Emerging economies have already started easing monetary policy, which again is a positive to stimulate growth. At this backdrop, the world economy economic growth in 2012 is expected to be lower than 2011.
In line with the sluggish growth across the world, in the later part of 2011, the company noted that world steel production fell significantly from a peak of 130 million tonnes in May 2011 to 115 million tonnes in Nov 2011, with China also curtailing steel production substantially during the same period. The disproportionate fall in steel prices globally relative to the drop in iron ore and coal prices put pressure on steel company margins.
A fall out of these global factors coupled with high interest rate / inflation in the domestic market in India led to a fall in growth rate in the Indian economy. The company expects that the easing of interest rate in the near future and likely policy initiatives by the Indian Government will stimulate the investment cycle and should pick up momentum in the months to come, which would help to improve steel demand.
JSW Steel Ltd., belonging to JSW group, part of the O P Jindal Group, is one of the lowest-cost steel producers in the world. The group has diversified interest in mining, carbon steel, power, industrial gases, port facilities, aluminum, cement and information technology. JSW Steel Limited is engaged in the manufacture of flat and long products including hot and cold rolled coils, galvanized and Galvalume products, and auto grade / white goods grade CRCA steel, bars and rods. Incorporated in 1994, JSW Steel Limited has grown to US $ 9 billion in a little over fifteen years, and is today one of the largest producers and exporters of coated flat products in the country with presence in over 100 countries across five continents.
