Volumes & Value Addition Helps Jindal Stainless Grow

Jindal Stainless Limited, the largest integrated Stainless Steel manufacturer in India, has shown a net profit of Rs.19.56 Cr. in the third quarter ended December'2000 as against Rs.19.18 Cr. in the corresponding quarter ended December'1999. During the same period, net sales, however, have registered an increase of 10% from Rs.306 Cr. to Rs.338 Cr. in the quarter ended December'2000. In the nine months ended December'2000, the stainless steel molten production has increased by 12% from 210,747 MT to 235,281 MT. However as a result of change in the product mix towards higher value added products and higher volume, the sales have increased by 36% from Rs.741 Cr. to Rs.1010 Cr. During the same period net profit increased from Rs.45 Cr. to Rs.55 Cr., representing a 22% growth in the current year.

The above growth has been achieved on top of 70% growth in net profit last year from Rs.37 Cr. in 1998-1999 to Rs.63 Cr. in 1999-2000.

Financial Performance -
Operating margins as a percentage of Net Sales have decreased marginally from 18.5% in quarter ended December'1999 to 17.5% in the current quarter,due to the following factors :-

1. Increase in power and fuel cost, due to substantially higher international oil prices. The rates have increased by approximately 20%.

2. Raw material cost has been volatile during the current year as prices of nickel, the major raw material in production of stainless steel, fluctuated from a high of USD 10,640 PMT (March'2000) to around USD 7,000 PMT in December'2000. Currently, nickel prices have stabilised at around USD 7,000 PMT.

3. Although the average cost of debt has been brought down from 16.5% to around 14.5%, this has not been fully reflected in reduction of interest cost as the earlier expansions have been completed and the interest and other related expenses are being charged to revenue account.

4. Due to the increased volatility in LME nickel prices the focus was more on domestic sales rather than exports during the current quarter.

Through a combination of productivity gains and cost reductions, we are confident of generating meaningful cost savings that are likely to flow to the bottomline. We continue to concentrate our efforts on value added segments and low / non-nickel stainless products in order to improve the earnings momentum. In the current financial year, our thrust on value added products is evident from increase in production of Cold Rolled Stainless Steel to 25,284 MT in the first nine months from 13,212 MT in the corresponding previous period, representing a more than 90% growth. During the same period production of Ferritic Grade 400 series stainless steel has also increased by 120% from 8,194 MT to 18,039 MT.

In process of moving up the value chain, we have executed an order for 2,500 MT of Ferritic Grade (ASI 430 Grade) for the Indian Mint. Further, developments for the Car Exhaust System, Railways, Architecture Buildings and Construction are under progress and would be the focus for Jindal Stainless in the future.

Jindal Stainless Limited is implementing its expansion of the cold rolling division to increase its capacity from 30,000 tpa to 90,000 tpa. The project is expected to be commissioned during the last quarter of the current / first quarter of the next financial year. This expansion of cold rolling division will enable Jindal Stainless to enhance its product range for manufacture of precision rolled cold rolled stainless steel strips which would further improve margins and growth in the next financial year.

We had put in place various restructuring measures over the past two years. The benefits of which have been reflected in our turnaround result and continuos growth. Jindal Stainless Limited is now a purely focussed stainless steel company and this should undoubtedly improve the quality of the earnings in future which in turn would enhance shareholder value in the long term.