JSW Steel net plunges by 52%

CORPORATE SCORECARD

JSW Steel, the country's third-biggest producer, said first-quarter profit fell 52 per cent because of a government-imposed cap on prices, record increase in raw material costs and a loss on its overseas borrowings.

Net profit dropped to Rs 220 crore in the three months ended June 30, from Rs 468 crore a year earlier, the Mumbai-based company said. Sales rose 54 per cent. JSW Steel and its local rivals couldn't pass on a threefold increase in coking coal prices and a doubling in iron-ore costs to customers because the government in May capped rates for three months to curb inflation. Indian prices of the alloy are as much as Rs 15,000 a tonne below global levels, Tata Steel and Steel Authority of India, said this month.

"There's been a super increase in raw material costs and the government, to keep inflation low, didn't allow us to raise prices,'' Managing Director Sajjan Jindal said.

Material costs have climbed 61 per cent from a year earlier, twice as much as earnings from each tonne of steel sold, he said. The company secures a third of its iron ore from own mines and relies on imports for its entire coal requirement.

JSW may raise prices next month to cover production costs that have climbed by $350 a tonne, Jindal said.

The three-month freeze ordered by the government ends on August 8.

"We would like to raise prices by as much but our customers won't accept it," he said. The increase will be "reasonable." The steelmaker had a foreign-exchange loss of Rs 310 crore in the quarter after the 7 per cent slide in the rupee against the US dollar forced the company to revalue its overseas convertible bonds.

JSW Steel's shares fell for a fifth day in Mumbai trading, losing 2.6 per cent to Rs 729.80.