JSW Steel on Tuesday reported a sharp increase of 29% (YoY) in its consolidated net profit to Rs 836 crore, though way below analyst estimates of Rs 1,032 crore, in the three months ended September 2017.
JSW Steel on Tuesday reported a sharp increase of 29% (YoY) in its consolidated net profit to Rs 836 crore, though way below analyst estimates of Rs 1,032 crore, in the three months ended September 2017, as cost pressure mounted due to high coking coal and zinc prices. The cost of material consumed surged 40% y-o-y to Rs 9,275 crore in Q2FY18, while the total expenses were up by nearly 17% to Rs 15,583 crore during the quarter. Speaking to newspersons at an earnings conference, Seshagiri Rao, joint managing director and group CFO said, “While globally steel prices are going up, in India steel prices are almost flat. So, more and more imports are coming at lower prices than what is prevailing internationally which is having an impact on the overall net sales realisations as far as the Indian steel companies are concerned. So, our costs have gone up but our realisations have not gone up to the extent which is prevailing in the international markets.”
Rao said, that “it is concerning that in Q2 the total imports into India on an annualised basis have reached 12 million tonnes.” However, a better product mix aided the company to improve its topline. The revenue from operations on a consolidated basis were up a good 17% y-o-y to Rs 16,818 crore beating Bloomberg analyst estimates of Rs 15,953 crore. Aided by an increase in domestic demand and favourable international markets during the early part of the quarter, the company achieved its highest ever consolidated quarterly sales volume of 3.96 million tonne. Also, the company liquidated a large part of the inventory that was built-up during the previous quarter in the run up to GST implementation. In the coated products, the company registered a production volume of 0.43 million tonnes and sales volume of 0.56 million tonnes. The overall sales of value added and special products grew by 17% on a sequential basis.
With the cost pressure, the company’s EBITDA (earnings before interest, tax, depreciation and amortisation) margins were lower by 229 basis points y-o-y to 18.1%, while the consolidated EBITDA grew 3.5% to Rs 3,036 crore. Going forward, Rao said, that domestic steel prices could increase by 7-8% as they have been at a discount and there is scope for an increase. As for demand, it is majorly driven by government led spending, he said. On the inorganic growth plans, while Rao declined to comment on which stressed steel assets will JSW Steel has expressed interest or looking to bid, but he said that not participating in a particular EOI (expression of interest) does not mean the company is out of the race. “Not submitting an expression of interest does not mean we are not bidding. Even after EOI date is over, if you can make a better offer, you can submit the bid before the final bid date,” Rao said. The consolidated net debt stood at Rs 42,764 crore as on September 30, 2017, down Rs 559 crore sequentially. The finance cost stood at Rs 950 crore during the quarter, which was flat compared to R945 crore in Q1FY18, while the borrowing cost stood at 7.26%, refinanced lower by 5 basis points.