JSW Steel posts lower-than-expected PAT at Rs 836 crore, up 29% y-o-y

Higher net sales volume lends firm support to bottomline even as realisations take a hit due to cheap imports

Sajjan Jindal-led JSW Steel on Tuesday reported a lower-than-expected consolidated net profit of Rs 836 crore in the September quarter, up 29 per cent on a year-on-year basis on the back of higher revenues even as the increased cost of raw material weighed on the bottomline.

The topline stood at Rs 16,818 crore in the period under review, up 17 per cent from the corresponding period last year mainly due to higher volumes as realisations remained subdued with cheap imports impacting the domestic pricing scenario for flat steel products.

"Net sales realisations were unattractive during the quarter when compared with global players as domestic prices were about 8 percent lower than landed cost of imports," said Seshagiri Rao, managing director and group chief financial officer at the earnings conference held in Mumbai on Tuesday.

As per Bloomberg estimates, the company's consolidated net profit was seen at Rs 1,031 crore, while the net sales was expected to be at Rs 15,953 crore.

Due to increased raw material prices, that of zinc and coking coal, JSW Steel's EBITDA margin took a hit of 229 basis points and stood at 18.05 percent in the September quarter from the corresponding period last year.

"The company's cost of production at a consolidated level during the quarter went up by 28 per cent on year-on-year basis hurting the EBITDA margin," explained the management.

However, operating EBITDA of the company, in the period under review, was up 4 per cent on a year-on-year basis at Rs 3,036 crore. Also, JSW Steel,s EBITDA per tonne stood at Rs 7,460 in the quarter gone by, up from Rs 7,020 a year ago and Rs 6,262 from the preceding quarter.

Going ahead, the management is seeing an improved pricing scenario for product prices with demand looking better in the second half of the year compared to the first half and with coking price benefit of $12-$15 per tonne.

"Iron ore prices look stable while coking coal prices have tapered down and this will help the company get the benefit of the raw material," said Jayant Acharya, director commercial at JSW Steel.

Meanwhile, noting the fluctuation in raw material prices mainly that of coking coal, the company will be restarting its US coking coal mines in the next three months, informed the management.

Also, going ahead if global prices continue to remain more attractive than domestic just as it was in the September quarter, the company said that it would focus more on exports for sales.

With an installed capacity of 18 million tonnes,  the management informed that it has managed to reduce the cost of servicing consolidated net debt sequentially by 5 basis points to Rs 42,764 crore as on September 30, 2017 and the debt: equity ratio stood at 1.87.

JSW Steel, apart from brownfield expansion is also bidding for some of the five stressed steel assets under NCLT. With an ambitious capacity expansion plan of 40 million tonnes, the company is looking to capture lucrative opportunities via organic as well as inorganic route.