The company's sales increased to Rs 1,087.91 crore in the first six months as against Rs 1,083.87 crore in the same period of the previous year. In the same period of last year, Essar Steel had posted a Rs 16.53 crore net profit.

Other income shot up to Rs 42.95 crore as compared with Rs 2.66 crore last year, due to prior period adjustment of exchange fluctuation relating to advance on long-term supply contract.

While sales realisation were lower, Essar Steel had to absorb cost increases in all the main inputs including iron ore, freight, and power, which could not be passed on to the customer.

Its gross profitbefore interest, depreciation and tax stood at Rs 254 crore as compared with Rs 351.82 crore in the same period of last year.

The company said the depressed market resulted in accumulation of inventories and consequently net interest and financial charges jumped to Rs 194.2 crore against Rs 169.78 crore in the same period last year.

Depreciation, amortisation and deferred revenue expenses increased marginally to Rs 166.6 crore from Rs 165.51 crore in the first half of the previous year.

The company said it has aggressively begun a systematic cost reduction programme with the aim of reducing the cost of hot rolled coils by Rs 1,000 per tonne.

During the first half, production of hot rolled coils were up 23 per cent at 8.1 lakh tonnes, while sales registered an increase of 3.5 per cent at 6.71 lakh tonnes.

The hot briquetted iron plant operated at 99 per cent capacity and production increased to 8.69 lakh tonnes, an increase of 9 per cent.

Globally, the steel industry has been passing through one ofits worst downturns with prices of HR coils declining from $280-$290 per tonne in April to the present level of $200 per tonne.