JSW Steel Q2 profit rises 29% to Rs836 crore on higher steel sales

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Mumbai: JSW Steel Ltd Tuesday said consolidated net profit in the September quarter rose 29.2% from a year ago to Rs836 crore. The profit jump came on the back of a 16.6% rise in revenue to Rs16,818 crore. The profit, however, sharply missed Bloomberg analyst estimates of Rs1,032 crore.

The company missed the estimate primarily because of costlier raw materials, leading to its earnings before interest, taxes, depreciation and amortization (Ebitda) rising just 4% from a year ago to Rs3,036 crore, even as Ebitda margin shrank 220 basis points to 18.05%.

Ebitda/tonne, on the other hand, rose to Rs7,460 during the September quarter from Rs7,040 from the year-ago period and Rs6,266 in the June-quarter.

Seshagiri Rao, JSW Steel’s joint managing director and group chief financial officer, said the more-than doubling of coking coal prices and a substantial increase in zinc prices raised the company’s per tonne cost of production by 28%. Realizations, on the other hand, failed to keep pace as imports from China surged once again, thereby putting pressure on margins, Rao added.

“In Q2, total imports into India reached 12 million tonne on an annualized basis. Sequentially, imports from China grew by 102%. So, while internationally steel prices have gone up substantially, in India they are more or less flat relative to Q1 of the current fiscal,” Rao said.

Rao explained that while anti-dumping duty on steel continues as a safeguard measure, the fact that it gets triggered only when the import price is below $489/tonne, has made it irrelevant at current international price levels. “$489/tonne is no more an effective tool to moderate imports. Therefore, there is a need for the government to look at the kind of imports that’s coming into India,” Rao said.

On the volume front, the company said sales during the quarter rose 3.7% from the year-ago period and 16.8% sequentially to 3.96 million tonne. Rao attributed the rise in volumes, despite flat realizations and cost pressures, to a better sales mix and increase in sales of value-added and special products (VASP). “Value-added and special products now constitute 60% of our total volumes. Hence, 60% of our production is not subjected to the usual volatility of the steel industry,” Rao added.

Rao said JSW steel managed to reduce its net debt by over Rs500 crore during the quarter to Rs42,764 crore and its net debt to equity and net debt to Ebitda stood at 1.87 and 3.67 respectively at the end of the quarter. He said domestic steel prices are currently about 8% lower than the landed value of imports and hence are likely to firm up during Q3.

On Tuesday, JSW Steel shares fell 2.22%, or Rs5.85, to Rs257.85 while the benchmark Sensex lost 0.16%, or 53.03 points, to end the day at 33,213.13.