JSW Steel Targets volume sales growth of 78%

Highlights

• The company posted standalone net revenue of Rs 3328.80 crore during the quarter ended March 2009, which was 7% lower compared to the corresponding quarter of the previous year. The standalone net profit during the quarter under review was Rs 49.20 crore as compared to a net profit of Rs 370.18 crore during the corresponding quarter of the previous year.
• The standalone net sales for the full year ended March 2009 increased by 23% to Rs 14,001 crore as compared to the previous fiscal. The standalone bottom-line for the full year stood at Rs 458.50 crore as compared to Rs 1728.19 crore during the previous fiscal.
• The standalone debt gearing was 1.24 during the year ended March 2009 as against 0.93 during the end of the previous fiscal. The standalone gross debt in the book is around Rs 10,047 crore and the average cost of debt during the year increased to 8.22% as compared to 7.34% during the previous fiscal.
• The consolidated turnover during the year ended March 2009 increased by 28% to Rs 16104.71 crore. The consolidated net profit fell to Rs 274.91 crore during the year ended March 2009 as compared to Rs 1640.04 crore during the previous fiscal. The poor performance of the consolidated entity was due to write down of inventory and demand contraction in USA and UK.
• The USA operation of the company is performing poorly whereas the company has deferred any further investment in Chile due to poor business environment.
• The consolidated debt in the book is around Rs 14,631 crore and the debt gearing was 1.79. The average cost of the consolidated debt is 7.17%.
• The company plans to lower the standalone debt gearing to 1.1 from the current level of 1.24, whereas it plans to reduce the consolidated debt gearing to 1.5 by the end of the current fiscal.
• The expansion project of increasing capacity to 7.8 million metric tonnes per annum at Vijayanagar works has commenced commercial production on April 10, 2009. The current expanded crude steel capacity is around 7.8 million metric tonnes.
• Production of Crude Steel during the quarter ended March 2009 stood at 9.66 lakh tonnes as compared to 9.93 lakh tonnes during the corresponding quarter last year indicating a negative growth of 3%. However the sale of saleable steel during the quarter increased 5% to 1.062 million metric tonnes.
• Production of Crude Steel during the full year ended March 2009 increased 3% to 3.724 million metric tonnes whereas the sale of saleable steel during the year increased 1% to 3.428 million metric tonnes.
• The sale of Rolled: Long during the quarter ended March 2009 increased by 19% to 96000 metric tonnes whereas during the full year ended March 2009 it increased by only 1% to 293000 metric tonnes.
• Sales of Semis during the quarter ended March 2009 stood at 110000 metric tonnes as compared to 123000 metric tonnes during the corresponding quarter last year.
• During the end of the quarter-ended December 2008 the company had high cost steel inventory due to rise in cost of coal, which were completely moved during the previous quarter.
• The company is consciously making efforts to bring down the international sales and thus concentrating on domestic sales in order to increase its volume. Earlier the export/domestic sales ratio was 40:60. Now it plans to lower this ratio to 13:87 in favor of domestic sales.
• Also the company plans to focus in the rural and semi urban areas in order to increase sales through JSW Shoppe and Dealer networks. The company has more than 50 JSW Shoppe currently and it plans to increase it to around 600 outlets.
• The company plans to reduce operating costs by as much as 40% through increased use of captive coke, lower fuel consumption & fluxes usage in iron making units, improvement in LD gas recovery in steel making.
• The first phase of 5 million metric tonnes new hot strip mill will be completed by March 2010. The company would also install 30 MW power plant and railway siding in Wasind & Tarapur by this period.
• The expansion of total crude steel capacity to 10 million metric tonnes would be completed by March 2011. There would also be 300 MW of captive power plant installed by this period.
• The company plans to increase production by 72% to 6.40 million metric tonnes during the current fiscal. The total sale of saleable steel for the current fiscal is targeted at 6.10 million metric tonnes, thus growing by 78% as compared to the previous fiscal.
• The total capital expenditure for the current fiscal is expected to be Rs 2,900 crore, out of which Rs 900 crore would be financed through debt and the balance Rs 2000 crore is through internal cash accruals.
• The capex for the fiscal 2011 is expected to increase to Rs 7000 crore out of which the company has already tied-up debt worth Rs 4800 crore and the remaining Rs 2200 crore would be funded through internal accruals.
• The steel demand in the country is expected to grow by 6% going forward. However the price is not expected to move up as many of the global steel manufacturers are operating at 40-50% of there installed capacity. So as the demand increases additional supply would check the price increase.
• The domestic steel manufacturers face a huge threat of cheap steel being dumped into the country by the global players. In order to protect the domestic manufacturers the government is planning to impose 25% safeguard duty on imported steel, the discussion paper for which is already presented. The meeting on the decision is scheduled on 11^th May 2009.