JSL Stainless expects margins around 14-15% ahead

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JSL Stainless expects margins around 14-15% ahead

JSL Stainless has announced its FY11 results. In an interview with CNBC-TV18, Arvind Parakh, CFO, JSL Stainless says, the company will maintain margins at 14-15% going forward.

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Excerpts from Markets Midday on CNBC-TV18 Watch the full show » ALSO READ See latest News about Jindal Stainles See previous management interviews See what other Experts & Brokerages are saying about Jindal Stainles JSL Stainless BSE | NSE 30/05/12 Are Mutual Funds betting on JSL Stainless?

JSL Stainless has announced its FY11 results. The company's FY11 consolidated net profit was down 19% at Rs 319 crore versus Rs 392 crore. Its FY11 revenues were up 22% at Rs 7,534 crore versus Rs 6,149 crore.

In an interview with CNBC-TV18, Arvind Parakh, CFO, JSL Stainless says, profits were low on account of lower exchange gain. 

He further says, the company will maintain margins at 14-15% going forward.

Also read: JSL Stainless FY11 cons net profit down at Rs 319 cr

Below is the verbatim transcript of his interview with Latha Venkatesh and Sonia Shenoy of CNBC-TV18. Also watch the accompanying videos.

Q: Could just give us your quarter four numbers?

A: The quarter four was slightly impacted because of the Orissa operations where sales were up by about 6-7%, and earnings before interest, taxes, depreciation and amortization (EBITDA) was marginally down. For the whole year, on a consolidated basis, the top-line was up by almost 23% to Rs 8,000 crore. Profit before tax and exceptional item was up by 30%. 

The profit is down by 90% largely because of the exchange fluctuations, the gain from Rs 299 crore down to Rs 75 crore. So, the profit after tax (PAT) is down by 19% largely because of exchange gain. But at operational level, things have improved quarter-on-quarter. Overall, things are definitely much better than what we had anticipated.

Q: You are saying is that last year same time you had an exceptional gain in forex, right?

A: That is right. From Rs 292 crore, it is down to Rs 75 crore. So, it is a gain in both the years. From Rs 292 crore for year ending 09-10 the exchange gain is down to Rs 75 crore in the current year. That is the reason for the drop in profitability. We have a lot of subsidiaries which are highly operationalised, we have got the Indonesian subsidiary. We have got two subsidiaries in India. So, on a consolidated basis, the profit is up by 30% to almost Rs 398 crore. So, operationally it has been a better performance.

Q: You have a consolidated audited numbers also over here, but even there your earning per share is down from Rs 24 to Rs 16.50 or Rs 17.

A: That is because of two reasons. One, because of the dilution; there has been some conversion. We have issued foreign currency convertible bonds. They got converted in the last quarter of this year itself. Second reason is the minority interest. If you see on an absolute basis, that was our number. But earning per share (EPS) wise, yes, it has got impacted.

Q: You were telling us about your margin performance on the EBITDA line, what kind of margins do you think are sustainable in FY12 on this base of about 16% EBITDA margin performance that you are sitting?

A: If you see the EBITDA per tonne or EBITDA percentage was down, but the main factor for that was our Orissa operation. There our linkage is yet to start for our own captive power plant. Pending that, we were selling it to the grid where the grid prices came down and even the e-auction coal prices have gone up. So, the Orissa operations got impacted. That is why the overall EBITDA per tonne or percentage as you are saying has got impacted. 

At our main stainless steel operations, the margins would be around 14-15%. This year we will have to wait and see because that we have doubled our capacity. From 70,000-80,000 tonne, which is already operational, we are also adding another 800,000 tonne of steel smelting capacity at Orissa. And that will get operationalised fully downstream in terms of finishing facilities in the current year. So, we will be running a 1.5 million tonne stainless steel operations, gradually things will start picking up.