JSW Steel First-Quarter Profit Slumps 90% on Currency Loss

JSW Steel Ltd. (JSTL), India’s third- biggest producer of the alloy, reported an unexpected 90 percent drop in first-quarter profit following a currency loss. The shares plunged.

Group net income slumped to 500 million rupees ($8.9 million) in the three months ended June 30 from 4.85 billion rupees a year earlier, the Mumbai-based company said today in a statement. The median profit estimate of 24 analysts surveyed by Bloomberg was 4.92 billion rupees. Sales climbed 45 percent to 107.8 billion rupees.

Indian steelmakers, including bigger rivals Tata Steel Ltd. and Steel Authority of India Ltd., are expected to book currency losses on overseas loans taken to purchase companies or coking coal and factory equipment for expansion, said Niraj Shah, an analyst at Fortune Equity Brokers India Ltd. in Mumbai. The rupee fell 8.6 percent in the three months ended June 30, the worst performance among Asian currencies, according to data compiled by Bloomberg.

The group incurred a one-time foreign-exchange loss of 5.92 billion rupees, according to the statement. In June, JSW Steel repaid $391.85 million of its zero-coupon foreign-currency bonds issued in 2007. The company raised $225 million in overseas loans and added $166.85 million from internal cash flows to make the payment, it said in the statement.

Crude steel output at JSW’s biggest factory in the southern state of Karnataka rose 27 percent to 2.1 million metric tons in the last quarter from a year earlier.

Shares Fall

JSW Steel shares fell 3.9 percent to 643.75 rupees at the close of trading in Mumbai. The stock has gained 27 percent this year, compared with a 7.7 percent increase in the key Sensitive Index.

The 10 million-ton-a-year factory in Karnataka operated at about 80 percent of capacity, Chairman Sajjan Jindal told reporters after the annual shareholders’ meet in Mumbai yesterday. Iron ore mining is expected to restart in the state by next month, following which the capacity use at the factory may climb to 95 percent, he said.

The Supreme Court on April 20 asked 45 iron ore mines in Karnataka to seek government approval to resume operations before lifting a ban imposed in the state following environmental violations. The court had halted mining in the Bellary region in July last year and extended the ban to two other districts the next month, cutting ore supplies.

To contact the reporter on this story: Abhishek Shanker in Mumbai at ashanker1@bloomberg.net

To contact the editor responsible for this story: Rebecca Keenan at rkeenan5@bloomberg.net

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