JSW Turns to Profit on Higher Output, Foreign-Exchange Gain

JSW Steel Ltd., India’s third-biggest producer, returned to profit in the second quarter after increasing production and benefiting from a one-time foreign-exchange gain.

Group net income was 6.91 billion rupees ($128.5 million) in the three months ended Sept. 30, compared with a 6.69 billion-rupee loss a year earlier, the Mumbai-based company said yesterday in a statement. The median estimate of 28 analysts surveyed by Bloomberg was for a profit of 4.62 billion rupees. Sales climbed 17 percent to 94.75 billion rupees.

Production at JSW’s biggest factory, in Karnataka, rose 25 percent in the quarter to 2.17 million metric tons from a year earlier after it secured iron ore supplies from government auctions of the raw material. The nation’s top court, which banned mining in the southern Indian state in August last year pending investigations into violations of environmental norms, allowed limited sales of iron ore to steelmakers in the state.

Earnings were boosted by a foreign-exchange gain of 4.24 billion rupees. JSW had incurred a foreign-exchange loss of 4.86 billion rupees in the second quarter last year.

JSW shares gained as much as 2 percent to 748 rupees in Mumbai and traded at 746 rupees as of 10:52 a.m. The stock has rallied 47 percent this year, compared with a 21 percent advance in the benchmark BSE India Sensitive Index. Unit JSW Ispat Steel Ltd. gained as much as 5.1 percent, the most since Sept. 21, to 10.4 rupees and traded at 10.1 rupees.

Total costs at JSW, in which Japan’s second-biggest steelmaker JFE Holdings Inc. holds a 15 percent stake, increased 18 percent to 85.29 billion rupees in the quarter, according to the statement. Tax expenses rose more than fivefold to 3.36 billion rupees.

The company benefited from lower costs of coking coal, another key steelmaking ingredient, last quarter. Quarterly contract prices of coal fell 25 percent to $225 a ton in the three months ended Sept. 30, faster than a 19 percent increase in prices of global benchmark hot-rolled coils used to make flat steel.

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