JSW Steel reports highest ever quarterly PAT at Rs 1,109 crore

Sajjan Jindal-led JSW Steel reported a better-than-expected net profit of Rs 1,109 crore in the June quarter, the highest-ever quarterly bottomline churned by the company, on the back of increased volumes and significant reduction in cost even as realisations remained a tad up. In the corresponding period last year, the Mumbai-based company had reported a net profit of just about Rs 21 crore.

Net sales of the steel producer stood at Rs 12,709 crore in the period under review, up 3% from same period last year with significant contribution coming from exports, which accounted for 19% of the total volume produced. In the period under review, sales to the automotive sector grew 16% on an year-on-year basis, while sales of branded products jumped 15%.

 

As per Bloomberg estimates, JSW Steel was expected to report a bottomline of Rs 742 crore in the quarter gone by, with revenues seen at Rs 12,311 crore. The company's reported operating EBITDA was also higher at Rs 3,261 crore as against the estimates of Rs 2,588 crore.

“With strong and remunerative export orders, the company has strategically re-focussed on the export sales during the quarter, which grew by 39% on year-on-year basis, cushioning the impact of flattish domestic sales," said Seshagiri Rao, joint managing director and group chief financial officer of JSW Steel.

Total expenses of the company slipped to Rs 10,447 crore in the June quarter, down 11% from the same period last year, which in turn helped the company report a strong operating profit.

“During the quarter, steel production ramp-up in the industry was ahead of expected demand pick-up in the latter part of the year. At the same time, domestic apparent demand growth was almost flattish at 0.4% on a year-on-year basis,” informed the management.

Though the minimum import price (MIP) on steel did help the domestic steel industry as imports dropped 26% in the period under review, JSW Steel management is of the view that the drop was not in line with expectations of a 50% drop. The management also informed of circumvention happening in steel imports, which could be addressed via extension of MIP which ends in August and expansion of MIP which would bring in more products under the gamut.

Regarding its overseas performance, for yet another quarter, JSW Steel's global subsidiaries continued to remain a drag on the company's performance as it reported an EBITDA loss of $5.45 million.

Going ahead, the management sees pressure on prices as demand is likely to remain sluggish and hence intends to focus on cost reduction.

"There is scope to lower cost in terms of fuel efficiencies and logistics. Also, we intend to increase volumes in the coming quarters, which would bring down the fixed cost per tonne," said Rao.

On a standalone basis, the company's EBITDA per tonne in the period under review stood at Rs 9,270 as against Rs 5,398 a year ago.

Though demand is expected to remain weak in the coming months, the management said second half of the year is expected to show rise in demand mainly from solar, defence and railways division. 

The company also intends to ramp-up production at its Dolvi plant to meet the estimated increase in demand which would add volumes in the coming quarters. The company has set a production target of 15.75 million tonne for this fiscal with 15 million tonne being the saleable steel target that indicates a growth of 24-25% on a year-on-year basis.