JSW Steel Plunges to 14-Month Low on Profit Decline
Jan 28, 2011
JSW Steel Ltd., India’s third- biggest producer, plunged to the lowest level in 14 months in Mumbai trading after reporting a worse-than-expected 32 percent decline in third-quarter profit.
The shares fell 6.2 percent to 903 rupees, the lowest price since Nov. 13, 2009 at the close. The stock fell 5.1 percent yesterday, after JSW Steel reported earnings for the period ended Dec. 31.
“JSW Steel’s third-quarter results were disappointing,” said Niraj Shah, an analyst at Fortune Equity Brokers Ltd. in Mumbai, after changing his rating for the stock to “sell” in a report today. “Higher raw material costs proved a drag on margins.”
Group net income fell to 2.92 billion rupees ($64 million) in the three months ended Dec. 31 from 4.3 billion rupees a year earlier, the Mumbai-based company said in a statement yesterday. The average estimate of 12 analysts Bloomberg surveyed was for a 7 percent drop. Sales rose 24 percent to 59.6 billion rupees.
Global coking coal costs rose 61 percent in the quarter, while iron ore rates almost doubled. JSW Steel’s cost of the main raw materials surged as much as 30 percent in the period, while steel prices gained 13 percent, Chief Financial Officer Seshagiri Rao said in Mumbai yesterday.
“We maintain our ‘sell’ rating on the stock as we believe that higher raw material prices along with uncertainties with respect to the Ispat acquisition will continue to be an overhang on the stock,” analysts Amit Agarwal and Varun Lohchab at Religare Capital Markets said in a report today.
JSW Steel said in December it will take control of Ispat Industries Ltd. in the biggest deal by a local steelmaker in 3 1/2 years as it aims to boost capacity amid rising demand.
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