Operating margins to drop marginally in FY12: JSW Steel

MUMBAI: Steel major JSW Steel on Tuesday cautioned its operating margins are expected to remain depressed, largely on account of higher prices of inputs and the company has taken definitive steps to cement its input security.

"The operating margins are expected to decline marginally in 2011- 12 (as against the fourth quarter of 2010-11) due to higher coking coal prices," JSW Steel Chairman Sajjan Jindal told shareholders at the company's 17th annual general meeting (AGM) here.
However, the firm's earnings are expected to increase through volume growth, higher raw material integration from international resource bases and increased cost efficiencies through enhanced capacities in captive power, captive coke, beneficiation, sintering and pelletisation, Jindal said.

Commenting on future outlook, Jindal said demand for steel is expected to grow over the coming years. This optimism is borne out from an important reality.

The top four Indian steel makers are expected to increase their capacity by 26 per cent in 2011-12 taking India's steelmaking capacity to 98 million tonnes, according to government estimates, he said.

According to a World Steel Association report, India's steel consumption is forecast to grow 13.3 per cent in 2011-12 and 14.3 per cent in the following year, more than double the pace of the global demand.

JSW Steel has taken definitive steps to cement its input security which is extremely essential considering the unprecedented changes in contractual terms and pricing in the coking coal and iron ore space, Jindal said.