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JSW Steel – Hit by Rising Cost

May 6, 2008

JSW Steel one of the main companies behind steel cartel in India reported a PAT for 4Q excluding SISCOL, prior period taxes and write-back of misc expenditure works out to Rs3bn (-15% yoy). 4Q PAT would have been higher excl forex translation loss of Rs930m. EBITDA was Rs7.2bn (-7% yoy) and the margin was 23.1%, lower yoy and qoq. SISCOL reported FY08 PBT of Rs660m and 21% EBITDA margin.

During 4Q coke costs jumped 89% yoy to Rs19,000/t and iron ore costs rose 98% to Rs2,300/t. Costs are slated to rise further. JSTL has tied up its coking coal at US$305/t for FY09. Iron ore hikes have not yet been finalized but are likely to be in excess of 65%. JSTL has ~25% of captive iron ore and expects ~60% captive iron ore and ~45% coking coal by 2010.

Margins are likely to be hit somewhat in 1Q FY09 as prices are being maintained at current levels for the next 2-3 months. JSTL also passed on the impact of the import duty cut on raw materials by reducing prices of HRC by Rs500/t.

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