JSW Steel beats estimate; April-June consolidated net profit at Rs 23.39 bn

Increased volumes, better realisations in both overseas and domestic market lend strong support to bottom line

Sajjan Jindal-led JSW Steel on Wednesday reported a higher-than-expected consolidated net profit of Rs 23.39 billion for April-June quarter on the back of robust net sales. The profits have increased almost four-fold than what was churned in the corresponding period last year.

The company's net profit stood at Rs 6.24 billion in the corresponding period last year.  

Increased volumes and better realisations both in overseas and domestic market lend firm support to company's top line which jumped 24 per cent on year on year basis to Rs 199.50 billion in the period under review.

"The transformation in our sales mix which included the strategy to focus on domestic market more than exports along with a y-o-y growth of retail sales of 27 per cent, led to a robust performance for the company in the quarter ended June," joint managing director and group chief financial officer Seshagiri Rao said at the earnings conference. 

Domestic sales volumes grew 27 per cent on y-o-y basis in the quarter gone by as against a demand growth of 9.2 per cent in India market. Sales in the automotive segment were also strong in the period under review witnessing a growth of 57 per cent compared to the same period last year.

Though the company did continue to face some cost pressures during the quarter, its consolidated EBITDA per tonne stood at Rs 13,750 as against Rs 7,732 in the same period last year.

"All our subsidiaries both in India as well as overseas (the US) have performed well this quarter which has helped us report strong numbers," informed Rao.

As per Bloomberg estimates, the company's net sales were seen at Rs 192.83 billion, while net profit was expected to be at Rs 21.05 billion in the June quarter.

With regard to its acquisitions, JSW Steel will be taking around a year to turnaround Monnet Ispat which it has acquired via NCLT route and has completed the acquisition process for Acero Junction Holdings in the US and Aferpi S.p.A in Italy.

JSW Steel, through a combination of organic and inorganic acquisitions, is looking to take capacity to 25 million tonnes from current 18.1 million tonnes by 2022 with an investment of Rs 450 billion.

Protective measures taken by the US and Europe in the last few months is leading to increased imports of steel into the country, injuring the sector and posing threat to the domestic steel industry. JSW Steel management on Wednesday informed that the industry would be making representation to the government asking for a safeguard duty or fixed price mechanism from reference price mechanism as imports from the FTA (free trade agreement) countries has been higher than any other country.

Currently, there is anti-dumping duty on various steel products but with global steel prices have increased significantly since the imposition of anti-dumping, a relook at imports and duties protecting the industry is important, informed the management.

"We (the domestic steel industry) are asking for a balance, mutual and fair trade environment like other countries. Currently, steel is being dumped in the country at unfair prices, in some cases not even meeting quality standards," said Jayant Acharya, director commercial at JSW Steel.

Imports of finished products have increased by 30 per cent in the April-June quarter from the same period last year. At present, the reference price for hot-rolled is at $485 per tonne while global steel prices have moved above $600 per tonne making the reference price ineffective.