JSW Steel records higher-than-expected net profit of Rs 17.74 bn in Dec qtr

Increased exports, higher long product sales lends support to topline

Sajjan Jindal-led JSW Steel reported a higher-than-expected consolidated net profit of Rs 17.74 billion in the December quarter, a surge of 148 per cent compared to the corresponding period last year, mainly on the back of increased revenues and one-time exceptional item benefit of Rs 3.08 billion.

The company's topline in the period under review stood at Rs 176.69 billion, up 17 per cent from same period last year as exports which formed 30 per cent of total sales volume lent firm support along with sales of long products that grew significantly due to increased construction activity in the country.

As per Bloomberg estimates, the company's bottomline was seen at Rs 11.4 billion, while revenues were expected to be at Rs 170.31 billion in the December quarter.

"In December quarter, we have reported record high sales volumes of 4.03 million tonne up 12 percent year-on-year. This also reflects in our exports, which have grown 56 per cent year-on-year basis," informed Seshagiri Rao, Joint Managing Director and Group Chief Financial Officer of JSW Steel. 

In the exceptional item category, JSW Steel took a hit of Rs 2.64 billion as it surrendered one of its iron ore mines in Chile for which it had made a provision for impairment towards goodwill and mine development. However, with US having reduced its corporate income tax to 21 per cent from 35 per cent earlier, there was a reversal of deferred tax liabilities of Rs 5.72 billion for US businesses. This resulted in the net benefit of Rs 3.08 billion for the company.

Nevertheless, without the exceptional item, the reported bottomline was 96 per cent up compared to same period last year, informed the management.

The company's consolidated EBITDA/tonne in the period under review stood at Rs 8,991 as against Rs 7,585 in the corresponding period last year and Rs 7,461 in the preceding quarter.

On the debt front, JSW Steel's consolidated net debt as on Dec 31, 2017, stood at Rs 420.68 billion as its weighted average interest rate slipped by 25 basis points. Though the company's debt did come down by about Rs 7 billion in the quarter, going ahead it does not see a fall in interest rate.

While the company's capacity expansion plan at Dolvi to double capacity to 10 million tonne remains on track, it is also looking to grow via the inorganic growth route. The company will be bidding for three steel assets under NCLT — Monnet Ispat, Bhushan Steel and Bhushan Power & Steel.

"We are looking for presence in the east part of the country and hence are keen on assets in this region," explained Rao. Both of Bhushan Steel plants are in Odisha, while Monnet Ispat is in Madhya Pradesh.

At one end, where the company is gearing up to strengthen its presence in the country to capture strong demand outlook for the commodity, it is also preparing to build its backward integration. Apart from the five iron ore mines it has won in Karnataka, the company will now be participating in auctioning of another eight mines of C-category in the same state. JSW Steel has a 12 million tonne integrated plant in Vijaynagar for which it is looking to have a captive iron ore supply.

"Of the five mines already won, one mine will be operational from next week, while the second mine should be operational next month," informed Rao.

After the strong performance in the third-quarter, the management is bullish for final quarter of fiscal. "Chinese exports have come down, demand is looking strong, steel prices are seen firm and this should help us have better performance in coming months too," said Jayant Acharya, Director Commercial at JSW Steel.

Though the company garnered strong export volumes in the quarter gone by, appreciating rupee against the three-year low dollar should impact realisations of exports with a lag, informed the management.