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Jindal Steel and Power (JSPL) has reported a 49.6 per cent decline in consolidated net profit at Rs 452 crore for the quarter ended September, against Rs 897 crore in the year-ago period. This is mainly due to softer realisations, as well as higher interest and depreciation costs.
The finance cost more than doubled to Rs 380 crore during the quarter from Rs 159 crore a year before. Depreciation charges grew 17 per cent over a year to Rs 434 crore. The profit fall was much higher than the 17-30 per cent decline estimated by analysts (on an average, net profit was expected to be Rs 685 crore).
Net consolidated sales were up 7.4 per cent to Rs 4,949 crore, compared to Rs 4,607 crore a year before.
“The drop in earnings was largely due to drop of 12-15 per cent in the price realisations and interest and depreciation burden of investments made in the Angul Phase–1 steel plant and upgradation of the Raigarh steel plant,” the company said. JSPL's steel business (consolidated) recorded a yearly growth of 8.9 per cent in revenue to Rs 4,135 crore, while power revenues were flat at Rs 1,081 crore.
The power business also proved a drag on profitability, with its profit before interest and tax (PBIT, at a consolidated level) falling 7.3 per cent year-on-year to Rs 523 crore. This is despite Jindal Power (a subsidiary) reporting strong numbers.
With its plant load factor rising to 95.1 per cent versus 85 per cent a year before; its turnover was up 18 per cent at Rs 665 crore, while profit after tax increased 16 per cent to Rs 301 crore.
The main reason for pressure in consolidated financials was the steel business, which accounted for 63 per cent of consolidated PBIT. Its PBIT fell 23.3 per cent over the year, to Rs 878 crore in the quarter.
The management attributes the sluggishness in gross turnover to macro economic headwinds lowering the demand for steel and merchant power. “We had a turbulent weather in the money market and the rupee’s roller coaster ride in the second quarter. Now, it will be back to sunshine days,” said managing director Ravi Uppal.
In the past two years, global steel demand has been contracting. Except for India and China, countries have seen a decline, Uppal adds. In the past six months, production has increased by 2.5 per cent, while the demand has gone up only 0.8 per cent.
Due to rupee depreciation, the company recorded good exports. In volume terms, exports grew 32 per cent to 138 million tonnes during the quarter, compared to 104 mt in the same quarter previous year.
Importantly, the company has been able to reduce its inventory stock by 13 per cent during the quarter. It had an inventory of 540,000 tonnes in January, down to 375,000 tonnes. The target is to take it further down to 325,000 tonnes by the end of 2013-14.
During the quarter, JSPL also got a breakthrough in the railways segment. It bagged orders for rails in the home and global markets. It secured a rail order from the Dedicated Freight Corridor Corporation for the Delhi–Kolkata stretch and an export order from Ferrotech Alloys, UK. It launched a new brand, ‘Jindal Panther’, marking its retail foray.
Coal mining operations in Mozambique are expected to achieve the rated capacity of three million tonnes per annum (mtpa) by March 2014. The target is to reach 10 mtpa. This will provide raw material security to the company and insulate its margins from the vagaries of international coal prices. Coal accounted for a little over 10 per cent of operational expenses and is its second largest cost head after iron ore.
Uppal said JSPL would not make fresh investments in India unless it got regulatory approvals and clearances in writing. "Today, we have come to a point that we will never make any investment until we have in writing the license and land documents in hand. Our whole attitude has changed,” he said, on the Central Bureau of Investigation naming Naveen Jindal and Kumar Mangalam Birla in preliminary enquiries on the coal block allocation controversy. But, it’s business as usual and we have given CBI answers in full and they are fully satisfied, he added.
