JSW Steel reported a sharp increase in its consolidated net profit to R1,109 crore in the April-June quarter from R21.19 crore a year ago, thanks to a big saving in costs of nearly R1,325 crore. The company’s net sales for the quarter was up just 2.19% year-on-year at R12,720.19 crore. Realisations for the quarter were flat year-on-year at R35,992 per tonne.
During the quarter, JSW Steel’s saleable steel volume rose about 8% to 3.34 million tonne (mt). Total expenses in the quarter fell 11.3% to R10,447.85 crore. Ebitda (earnings before interest, taxes, depreciation, and amortisation) margin in the quarter was 28.4% compared with 16.6% a year ago. Exports were higher by 39% in the quarter, the company said. According to Bloomberg consensus estimates, the net profit of the company was expected at R742 crore on revenues of R12,311 crore.
Seshagiri Rao, joint managing director, JSW Steel, said, “After a sharp drawdown of inventories in the earlier quarters, the company replenished the finished goods stock in the current quarter to bring inventories to normalised levels. As a result, crude steel production stood at 3.87 mt while saleable steel volume was 3.34 mt. Cost reduction and volume growth were the drivers for the growth in the quarter… There is pressure on prices as demand is not good, so there could be some price reductions in the current quarter.”
Rao said international steel prices have come down, forcing prices in India to correct in June and July. Steel production in India rose by 4.8% in the June quarter, but demand has remained flat in this period, he said. Rao said the company would bid for all of the 14 C-category iron ore mines likely to be auctioned in Karnataka in September.
The company is aiming for a 25% growth in volume, to 15.75 million tonne per annum (mtpa) of crude steel, and sales of 15 mtpa of saleable steel in FY2017, as India’s long-term outlook for the steel sector remains bright.
“Demand is usually sluggish during the monsoon but a healthy monsoon and the Seventh Pay Commission are likely to drive growth from the second half of the financial year,” Rao said. JSW Steel on Wednesday closed at R1,738.30 per share on BSE, up 4.75% from its previous close.