JSW Steel's Q2 net profit falls 37% to Rs 1,595 cr on higher tax outgo

Tax expenses of Rs 910 crore hurt the bottom-line even as net sales were up 11.5% year-on-year

Sajjan Jindal-led JSW Steel reported a consolidated net profit of Rs 1,595 crore in the September quarter, down 37 per cent from same period last year as tax expenses ate into the profits despite higher sales.

In Q2FY21, the company’s consolidated net sales stood at Rs 18,662 crore, up 11.5 per cent from same period last year on improved realisations, spurt in sales of coated products along with a favourable geographical and product mix which led to growth in sales volumes.

“As domestic steel demand rebounded from recent lows and gained momentum, the company moderated its exports to 28 per cent from 57 per cent in Q1FY21 with higher sales in the domestic market,” said JSW Steel in a release on Friday.

The company also achieved an average capacity utilisation of 86 per cent in the September quarter, which was in line with pre-Covid levels of 85 per cent and up from 66 per cent reported in the preceding quarter, the company said.

The volume of value added and special steel sales were at 51 per cent of total sales in the quarter gone by, propelled by an increase in sales in auto and coated product segments by 392 per cent and 83 per cent, respectively. Retail sales also jumped 177 per cent sequentially supported by sales of branded products that rose 153 per cent quarter-on-quarter.

The company incurred a total tax expense of Rs 910 crore comprising Rs 504 crore current tax and Rs 406 crore deferred tax which hurt the company’s bottomline in the period under review.

Meanwhile, the operating earnings before, interest, taxes, depreciation and ammortisation (EBITDA) on a consolidated basis stood at Rs 4,414 crore, while on a standalone basis they were at Rs 4,176 crore, 24.9 per cent of  the revenue. The EBITDA/tonne on a standalone basis was at Rs 10,141 per tonne, said JSW Steel in its release.

Lower prices of imported coal and savings in procurement costs and fixed overheads brought down the operating cost, but were partially offset by an increase in iron ore prices, it said.

At the end of the September quarter, the company’s consolidated net debt/equity stood at 1.43x as against 1.54x at the end of the June quarter, while the net debt/EBITDA stood at 4.73x as against 5.74x in the preceding quarter.

With regard to capex and staffing at existing steel units, the Mumbai-based steel producer said that project activities had gained momentum following  an improvement in the availability of workforce at all locations.

A 1.2 MT wire rod mill has been commissioned at Vijayanagar and trial production is underway. The construction of an 8 MT pellet plant is also progressing well and is expected to be commissioned in Q3FY21, said the company.

In a bid to strengthen its backward integration, the company recently acquired mining blocks in Odisha (for an acquisition cost of Rs 817 crore) and started mining operations at the blocks from July 1, 2020. In Karnataka, the company commenced production from two out of three mines in September.

“Overall dispatches from captive mines in the second quarter constituted 27 per cent of iron ore requirements of the company,” informed JSW Steel.

While the company saw business sentiment in India improving over the recent months, it underlined that a recovery in the auto sector, mainly in two-wheeler and passenger segment, was better than anticipated.

“The rural economy is resilient, aided by a good monsoon, stimulus measures focused on increasing rural income and consumption. Further structural reforms like farm bill augur well for the rural sector,” said JSW Steel.