The Hindu Business Line : JSW Steel net down 38 pc on lower prices

JSW Steel Ltd has reported a 38.16 per cent decline in net profit for the quarter ended December 31, 2005, to Rs 139.20 crore from the previous corresponding Rs 225.11 crore.

At a press briefing, senior company officials cited lower steel prices as the prime cause for the profit dip.

The company's total sales turnover slipped 10.85 per cent to Rs 1,642.93 crore (Rs 1,821.15 crore). Net sales/income from operations were Rs 1,518.01 crore (Rs 1,714.93 crore).

For the nine-month period, it had a net profit of Rs 445.85 crore (Rs 465.97 crore) on a total turnover of Rs 5,031.18 crore (Rs 4,743.59 crore).

Rights issue: JSW Steel would be going in for a rights issue to raise a maximum of Rs 400 crore to part-finance its proposed one million tonne-cold rolling mill at the Vijaynagar works. The project costs Rs 1,000 crore and the balance Rs 600 crore, in the form of debt, has been tied up.

"The entitlement of the rights will be in the ratio of one equity share for every eight shares held on the record date to be fixed later. Besides, every share allotted on rights basis will also have two attached warrants separately tradable as Series `A' and Series `B' warrants. Series `A' warrant is convertible into one equity share between 18 to 36 months and Series `B' warrant is convertible into one equity share between 24 to 48 months. The warrant conversion price will be fixed on a formula linked to the then prevailing market price," an official statement said.

During the just ended quarter, JSW Steel's crude steel price was up 6 per cent at 5.69 lakh tonnes while its production of galvanised steel rose by 18 per cent to 2.06 lakh tonnes. Zinc prices, which went up more than three times in the last six months, have impacted manufacturing cost in galvanised steel.

Though end-product prices were revised recently, the cost pressure has been passed on to the market only marginally.

Acquisitions: According to Mr Sajjan Jindal, Vice-Chairman & Managing Director, JSW Steel was looking to acquire suitable finishing facilities in the US and Europe, in line with its goal of exporting slabs and rolling them closer to main markets.

"Steel prices, which were very high last year, have corrected downwards. We are now at a reasonable price level. $400 is a good price for hot rolled coils," he said.