JSW Steel Q4 net up over two-fold at Rs 171 cr

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Published: May 19, 2016 6:27:33 AM

JSW Steel surprised markets on Wednesday as it reported 174.5% increase in its net profit in the January-March quarter compared to a year ago to R171.25 crore, driven by lower cost and higher other income in the quarter.

jsw steelAs of March 31, 2016, JSW Steel’s net debt was R38,461 crore and the company plans to re-finance this debt to bring down interest costs by 0.5%. (PTI)

JSW Steel surprised markets on Wednesday as it reported 174.5% increase in its net profit in the January-March quarter compared to a year ago to R171.25 crore, driven by lower cost and higher other income in the quarter.

The net sales of the company, however, declined by 15% from a year ago to R10,471.21 crore due to lower realisations in the quarter. According to Bloomberg consensus JSW Steel was expected to report loss of R141 crore on revenue of R10,360 crore.

In the quarter the company’s total expenditure declined by 18% from a year ago to R9,666.72 crore while the company’s other income grew by 341.36% to R80.77 crore due to a provision in US coal asset for which the company has written back $13 million for the same.

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On Tata Steel’s UK plant for which JSW Steel is bidding, Seshagiri Rao, joint managing director said, “We are exploring the opportunity for aspirational growth. However, we are aware that we have some financial ratios which are not comfortable so we will take cautious steps. We cannot comment further at this stage.”

The company’s net debt to equity ratio as of March, 31, 2016 is 1.78X while net debt to EBITDA ratio is 6.33X. Rao said while the company has not taken any fresh debt but the ratio has gone up due to lower realisations and volumes impacting EBITDA.

As of March 31, 2016, JSW Steel’s net debt was R38,461 crore and the company plans to re-finance this debt to bring down interest costs by 0.5%.

Also the company will bid for 14 C-grade mines comprising around 14 million tonnes of iron ore in Karnataka. “The court has said that the auction should happen before July so we expect the same to happen in July,” said Vinod Nowal, deputy managing director, JSW Steel.

The imposition of minimum import price on various steel products during the quarter provided some relief and even though domestic iron ore prices increased, the firm benefited to some extent on account of lower coking coal prices. March quarter was marked by the re-commissioning of blast furnaces which were under planned shutdown towards relining, modification and capacity expansion at all three upstream steel making locations like Vijayanagar, Dolvi and Salem, Rao said.

The furnaces at Vijayanagar and Salem works were re-commissioned in February 2016 and the one at Dolvi was re-commissioned in March 2016. As a result, the company has been able to record crude steel production for the quarter at 3.21 million tonnes (MT), up 5% year-on-year. Saleable Steel sales volume was up 7% from a year ago to 3.28 MT.

The installed capacity of the company has increased by about 25% from 14.3 MTPA to 18 MTPA.

For the entire 2015-16 fiscal, JSW Steel reported a consolidated net loss of R741.95 crore. In the preceding fiscal, it recorded a net profit of R1,796.57 crore. Total consolidated income was lower at R41,878.88 crore from R52,971.51 crore during the period.

For 2015-16, the firm recorded a crude steel production of 12.56 MT, while saleable steel sales volume stood at 12.13 MT.

On the outlook, Rao said crude steel output is likely to grow by 25% to 15.75 MT in 2016-17 and saleable steel sales is likely to rise by 24% to 15 MT. The company has earmarked capital expenditure of R7,000 crore for the next couple of years but it will be used mainly for a water reservoir, for its downstream unit, Tinplate unit among others. In 2016-17 the company will go slow on expansion.

“We expect Indian steel demand to grow by about 6% in 2016-17. Government’s measures to pump prime the economy and progress on various policy reforms underpin a constructive medium term demand outlook,” Rao said.

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