JSW Steel Q2 net profit up almost 3-fold to Rs 20.87 bn, beats expectations

Increased volume sales, better realisation lend strong support to bottomline

Sajjan Jindal-led JSW Steel on Thursday reported a better-than-expected consolidated net profit of Rs 20.87 billion in the quarter ended September, almost three times higher than the Rs 8.36 billion garnered in the same period last year, on the back of higher revenues, which grew in volumes as well as in terms of realisations.   

Revenues from operations stood at Rs 208.91 billion in the period under review, up 23.54 per cent from the same period last year, on the back of increased domestic sales, which went up 11 per cent on a year-on-year basis as the share of auto sales rose by 36 per cent from the same period last year. The share of the company's sales in the South and West part of the country also contributed to the revenue stream as it increased by 12 per cent in the quarter gone by from the corresponding period last year.

"Rupee depreciation and higher prices helped the company have better realisations during the quarter," Seshagiri Rao, joint managing director and group chief financial officer, told reporters at the earnings conference on Thursday. "Since the domestic demand was strong, the company also reduced its exports in this quarter to 17 per cent from 21 per cent in the same period last year," Rao added.

According to Bloomberg estimates, JSW Steel's bottomline was expected to be at Rs 20.25 billion in the September quarter, while the topline was seen at Rs 203.90 billion.

A strong revenue stream led to increased operating earnings before interest, taxes, depreciation, and amortisation (Ebitda) at Rs 49.06 billion, up 62 per cent on a year-on-year basis with Ebitda per tonne at Rs 12,141 in the period under review as against Rs 7,461 in the same period last year. 

"A good geographical mix, along with increased steel prices, helped JSW Steel earn strong Ebitda in the quarter," informed Rao.

JSW Steel's consolidated saleable steel sales stood at 3.91 million tonnes in the September quarter, driven by 14 per cent increase in offtake from OEMs (original equipment manufacturers) and favourable international markets, said the company. 

The company's net debt as on September 30 stood at Rs 449.19 billion, up from Rs 390.90 billion in the preceding quarter, due to acquisitions made by the steel producer, rupee depreciation and increased requirement of working capital. 

During the quarter, JSW Steel completed the acquisition of insolvent Monnet Ispat, which has a capacity of 1.5 million tonnes at Chattisgarh. The company, through its Italian arm, also acquired Piombino Logistics and GSI Lucchini, which led to the debt increase on the books of the company, informed the management. 

"Though the overall debt has risen, the company's balance sheet continues to remain strong with consolidated net debt to equity at 1.46x and net debt to Ebitda of 2.35x at the end of the quarter," informed Rao.

As the company continues to look to grow via the organic and inorganic route, it aims to raise funds for the same. Hence, the board of directors has given an in-principle approval for a rights issue of up to Rs 50 billion with no set timeline so far.  

JSW Steel has aggressively bid for debt-laden Bhushan Power & Steel and is also planning to up capacity via brownfield expansions at its Vijaynagar and Dolvi units. If the company wins Bhushan Power, it will give Sajjan Jindal the much-needed presence in the eastern part of the country, where the company is already planning a greenfield 10-million tonne plant.

Going ahead, according to the World Steel Association, India's steel demand growth is estimated at 7.5 per cent for CY2018 from 5.5 per cent earlier on strong infrastructure spend and growth in consumer demand for automotive and white goods.