The country’s second largest steel producer, JSW Steel on Tuesday reported a sharp fall of 43% on a year-on-year basis in its consolidated net profit to Rs 624 crore during the April-June quarter due to cost pressure from high iron-ore and coking coal prices — key raw material for steel making — even as steel prices declined. However, the company’s earnings on almost all the fronts was ahead of analysts’ estimates. According to Bloomberg estimates, the company’s consolidated net profit was expected at Rs 471 crore.The cost of material consumed surged 55% y-o-y to Rs 9,020 crore in Q1FY18, while the total expenses were up by nearly 33% to Rs 15,124 crore during the quarter.
Speaking to newspersons at an earnings conference, Seshagiri Rao, joint managing director and CFO, JSW Steel said, “The divergence that has happened in the steel sector in India versus globally is that Indian steel prices corrected but the iron ore prices did not correct. This is particularly in Karnataka, where iron ore prices remained at a very high elevated levels and that has caused cost pressures”. Meanwhile, the global coking coal prices have nearly doubled on a y-o-y basis to $199 for the April-June 2017 period, Rao said.
However, despite the fall in steel prices, a better product mix aided the company to improve its topline. The revenue from operations on a consolidated basis were up a good 24% y-o-y to Rs 15,977 crore. The revenues were expected at Rs 14,109 crore, according to Bloomberg estimates. Sales volume were up 5% y-o-y to 3.5 million tonne and the company could do well by increasing sales in the domestic market. However, customers’ caution towards carrying inventories in the run up to GST implementation had an impact on volumes with some accumulation of inventory.
“We have moderated our export sales but at the same time we increased sales of our coated steel products,” Rao said. As the global steel prices came down, the company reduced the prices in India but at the same time the volatility seen in the prices of Hot Rolled Coil and Long Products, is not present in the coated products.