After posting a 79% increase in consolidated annual net profit despite absorbing the losses of JSW Ispat, JSW Steel is optimistic about maintaining the pace of growth. JSW Steel?s group joint managing director and group CFO Seshagiri Rao spoke to Debabrata Das and Prashant Mukherjee to discuss the company?s expansion projects and the benefits it will get from the lifting of the iron ore mining ban in Karnataka. Edited excerpts:
Can you elaborate on the benefits for JSW Steel from the lifting of the mining ban in Karnataka?
After the lifting of the mining ban we expect fresh iron ore availability to be near 15-16 MT. The additional iron ore availability will help in improving our capacity utilisation to 85%. Last year (2012-13) our capacity utilisation was 80%. More importantly, because this will be fresh iron ore our cost of production will improve, which will help the profitability.
On a standalone basis JSW Steel?s profit after tax fell 24%. Was this due to iron ore availability in Karnataka?
Partly it was due to the iron availability. But there were several other factors. We provisioned for higher tax expense at R143 crore. Last year also, we had an exceptional item benefit of R200 crore. Also the finance cost this quarter was higher because we had taken the debt on account of expansion of the Karnataka plant by 3 MT. But due to lack of availability of iron ore the revenues did not immediately start coming in from that expansion project.
How is the West Bengal project moving?
We have spent close to R600 crore already for the project where we want to set up a 10 MT per annum plant. We are committed to the project, but currently it is stalled because we haven?t yet got the mining lease for iron ore in the neighbouring state. We will not go ahead till we get the iron ore so we hope the issue can be resolved by the two state governments soon.
What is the status with the turnaround of the performance of JSW Ispat?
JSW Ispat is in the midst of its turnaround. It posted a profit in the fourth quarter of R159.33 crore. The profit was due to recognition of deferred tax assets but three critical modernisation projects at JSW Ispat will come on stream by June this year. The modernisation projects are on track and they are critical because they will bring down the cost of production at Ispat greatly.
What is the current debt levels of the company and what?s the production guidance for this fiscal?
We have a consolidated net debt of R19,500 crore and an average cost of debt of 7.6%. We are comfortable in servicing the debt. For the current fiscal with greater iron availability we should be able to produce 9.25 MT. The guidance is for JSW Steel standalone not taking into account JSW Ispat.