Sajjan Jindal-owned JSW Steel posted a consolidated net loss of Rs 115.5 crore in the second quarter against a profit of Rs 691.2 crore, mainly on foreign exchange losses of Rs 851 crore. But it put up a strong operational performance with higher sales volume driven by exports. Its revenue for the quarter rose to Rs 12,796 crore compared to Rs 9,275 crore.
The company hopes to cut foreign exchange fluctuations-related translation losses completely from this quarter onwards. “This will be last quarter where you are seeing such translational losses. We started covering all over exposure from payable side. As on September 30, we have covered 76% and in October, we have covered the balance,” said Seshagiri Rao, joint managing director and group chief financial officer. The company is hedging both its export and import foreign exchange exposure.
Rao claimed that the company's margins in second quarter improved by 2.2% on squeezing various efficiencies and higher export volumes. JSW Steel's exports jumped to 8,50,000 tonne from nearly 3,30,000 tonne in the first quarter. It aims to export at least 3 million tonne of steel this fiscal. South east Asia, Europe and US mainly contributed to exports
The company expects several projects on which it has been incurring capex over the last two years to improve operational performance from the next quarter onwards as they get ready for commissioning, helping it increase volumes, reduce cost and improve product mix. Rao said commissioning of a pellet plant and coke oven battery at its Dolvi unit in this quarter and next quarter would contribute in huge way to improving JSW Steel's consolidated bottomline.
In the second quarter, the the company commissioned several projects at Vijayanagar, including second cold rolled mill complex, corex furnace, blast furnace gas utilization waste heat recovery system and the like.
The ore availability in Karnataka remained under pressure as out of 40 category A and B mines approved by the government, only 15 mines were operating and the remaining 25 are expected to start operations over the next 3-6 months, which will provide an additional ore of 7 million tonne.
The company is, however, hopeful to achieve 100% capacity utilisation next year with an increase in ore availability.
Jayant Acharya, commercial director, indicated that steel demand in the country remained sluggish but is likely to improve in the second half with a revival in export led manufacturing and pick-up in construction activity. For 2013-14, he expected steel demand to grow at sub 3%. The company, which has increased flat product prices by more than Rs 2,000 per tonne over the last two months, is not looking to hike price in November. Achraya said long product prices, which have remained flat, may see some pick-up post December. Overall, the company sees steel prices to have an upward bias going forward following recovery in developed markets.
JSW Steel, which is looking to refinance its loans, plans to raise $600 million via external commercial borrowings this quarter. It will help the company increase its rupee dollar ratio to 52% from 39% as of September 30.