JSL sees first annual loss in FY09, defers projects

A worker sits on steel pipes at a steel pipes market in Mumbai in this July 2008 file photo. India's top stainless steel maker, JSL Ltd, will post its first ever annual loss in 2008/09, hit by volatile raw material prices and longer-than-expected shutdowns, an official said on Wednesday.

NEW DELHI (Reuters) - India's top stainless steel maker, JSL Ltd, will post its first ever annual loss in 2008/09, hit by volatile raw material prices and longer-than-expected shutdowns, an official said on Wednesday.

N.C. Mathur, director for corporate affairs, also said JSL had deferred by a year investments of 50 billion rupees into expansion, as demand for the rustproof steel remained slack while the outlook was "tough" for six months.

Much of JSL's steel is used in the infrastructure and industrial sectors, which have been hit hard by the economic downturn. India's industrial production has contracted and infrastructure output has been sluggish in the quarter.

"Demand is slack," Mathur said on the sidelines of a steel conference, "We had a huge cost of nickel inventories. We had done some shutdowns, which took longer than expected."

JSL, which controls 35 percent of the Indian market, posted losses in the December and the September quarters, and saw profits plunge two-thirds in the June quarter. It has not yet published March quarter results.

Much of the losses were due to souring bets on foreign exchange and commodity prices, as prices of nickel , a key ingredient, collapsed nearly two-thirds in the fiscal year.

Mathur said JSL was likely to post sales of 50 billion rupees in 2008/09, and production would have been 500,000 tonnes. It had an installed capacity of 600,000 tonnes per year.

JSL raised its annual capacity to 720,000 tonnes this fiscal, but plans for a 800,000 tonne plant in Orissa has been deferred to 2011 from 2010. Its plan to expand its Indonesian unit has also been slowed, he said.

Ahead of the news, shares in the firm closed 6 percent higher at 55.45 rupees in a Mumbai market that closed up 2.9 percent.

OUTLOOK FLAT

India's stainless steel demand would be flat at 1.3 million tonnes in 2009/10, said Mathur, who is also the president of the Indian Stainless Steel Development Association. Production would also remain static at 1.7 million tonnes.

"The next four to six months will be difficult."

JSL's capacity utilisation could come down to 60-70 percent in 2009/10, from around 80 percent in the previous year, he said.