Friday, Aug 05,
Most of the major steel plants situated near Bellary source a major part of their iron ore requirement from Bellary. As a result of the ban, operations are likely to be significantly impacted as volumes are expected to fall, leading to higher procurement and transportation costs, thus impacting the profitability of the low-cost steel producers.
During the April to June quarter , JSW Steel’s consolidated net sales increased 53% to . 7,438.69 crore while its net profit rose 64% to Rs 485.16 crore year on-year, registering the highest growth rate in the past six quarters . The growth was on account of higher volumes and better realizations and from contribution from Ispat Industries. The steelmaker’s operating profit increased 33% to 1,434.83 crore.
However, the company took the brunt of higher fuel and raw material charges, which decreased margins by 300 basis points to 19%. However, due to the ban, JSW’s margins are likely to get squeezed further. The company’s raw material expenses amounted to Rs 4,496.14 crore, or 60%, of its net sales. Its net debt, which was . 14426.36 crore as of March 2011, is 2.8 times its trailing 12-month operating profit.
The next hearing of The Supreme Court is scheduled for August 5. The fate of the company lies in the court hearing today, the outcome of which is anybody’s guess. Even though 25% of the country’s iron and steel production comes from Karnataka, it would be premature to assume the ban will be lifted anytime soon.
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