JSW Steel Limited reported net profit of Rs.127.12 Crores for second quarter FY12, on stand alone basis.  The profit would have been much higher had the production  not  cut due to  severe iron ore shortage and also the  forex translation losses of Rs.512.98 Crores due to  adverse movement in rupee dollar parity.

During the current quarter, the Company achieved  production of Crude Steel of 1.738 million tonnes. Production volume grew by 11% in crude steel, 2% in rolled flat products and 30% in rolled long products relative to that of corresponding quarter of the previous year.   The Company’s production was lower at least by 4,50,000 tonnes due to  acute shortage  of iron ore and higher procurement cost of iron ore also increased the cost of production of steel  by about  Rs.1500/- per tonne during the  quarter.

The Company achieved quarterly sales volume of 1.882 million tonnes, 19% growth in sales volume and 33% in Net sales value, compared to that of corresponding quarter of the previous year.

The key performance highlights are as under:

Q2 FY 12                     Vs Q2 FY 11

Ø  Volume growth (Crude Steel production )           :                11%

Ø  Saleable Steel Sold                                                 :                19%

Ø  Net sales                                                                   :                33%

Ø  EBIDTA                                                                 :         Rs. 1333 crs

Ø  Profit after tax                                                             :           Rs. 127 crs

Ø  EPS (Diluted)                                                              :                5.33

Ø  Net Total Debt gearing (Standalone)                   :                0.68

Operational Performance: Sales and production volumes are as under:

	(Million tons)
Products	Q2 FY 12	Q2 FY 11	Growth
Production :–   Crude Steel	1.738	1.571	11%
Sales:
–   Semis	0.076	0.086	– 11%
–   Rolled: Flat	1.467	1.215	21%
–   Rolled: Long	0.338	0.281	20%
Total Saleable Steel	1.882	1.583	19%

The Company has been facing for the past few months severe shortage of Iron ore due to banning of Iron-ore mining in the State of Karnataka by the Honorable Supreme Court of India. This problem of acute shortage of Iron-ore was further accentuated in Sept.’2011 when there was delay in the implementation of the Honorable Supreme Court’s directive to make available Iron-ore to the Steel Companies from stock piles and NMDC production through E Auction. This led to a steep drop of 28% in crude steel production in Sept.’2011 as compared to August’11, as the Company cut down its production at Vijayanagar Works to 30% in the last week of Sept.’2011

The Company’s Vijayanagar Works secured 1.924 million tonnes and Salem Works secured 0.156 million tonnes of Iron-ore in the E Auctions conducted so far by the ‘Monitoring Committee; against which the Iron ore received at site is only around 18% of total material procured by Vijayanagar Works in E-Auctions. The Company is yet to improve capacity utilization significantly from existing levels as the receipt of E-Auction material is taking considerably longer time due to procedural delays and logistical constraints.

Financial Performance:

The Turnover and Net Sales for the quarter stood at Rs. 8,242.55 crores and Rs. 7,625.06 crores, respectively, showing a growth of 33% over the corresponding quarter of the previous year, mainly due to higher volume and improved sales realization. The EBIDTA for the quarter is Rs.1,332.95 crores up by 15% over the corresponding quarter of the previous year. The Company has posted a Net Profit after Tax of Rs. 127.12 crores after considering foreign exchange translation losses.

Due to the unusual depreciation in the value of the rupee against US Dollar over the last three months, the net unrealized loss of Rs.512.98 crores on restatement of foreign currency monetary items at close of the quarter has been considered by the Company as an exceptional item.

The Company’s net total debt gearing stood at 0.68 (as against 0.64, as on 30.06.2011) and the weighted average interest cost of debt is at 7.33% (vis-à-vis 7.81%, as on 30.06.2011).

Projects:

3.2 MTPA expansion project at Vijayanagar  Works :

The Company has commenced commercial production from its Blast Furnace-4 as a part of 3.2 MTPA expansion project at Vijayanagar Works on 20th Spt. 2011.
With this all the major facilities under the project have started.

Other projects:

Second Phase of Blooming Mill at Salem Works has started commercial production from 1st September 2011.

Pellet Plant-2 of 4.2 MTPA at Vijayanagar Works has commenced on 15th July 2011 and is under trial run.

The implementation of another 300 MW Captive Power Plant (CPP4), Second Phase of Beneficiation Plant and Phase II of HSM-2 at Vijayanagar Works are progressing satisfactorily, to be commissioned in FY 2012.

Guidance – lower by  14%

Considering  the  severe shortage of iron ore and the bottlenecks in receipt  of  iron ore  at plant from E-Auctions, the Company reduced the guidance for FY 2011-12 volume of production   and sales  to 7.5 million tones (lower by 1.25 million tones 14%)  and 7.8 mill tonnes  (lower by 1.2 million tones 13%) respectively.  The loss of steel production  / sales  not only  impacts the profitability of the Company, but the  Government stands to lose about  Rs 600 crores  by taxes and duties for  the current financial year.