JSW Steel Q3 PAT down 10% to Rs 1,603 cr on higher costs; top line up 11%

Rising iron ore and coking coal prices, depreciation of acquired global assets drag bottomline

Sajjan Jindal-led JSW Steel on Wednesday reported a lower-than-expected consolidated net profit of Rs 1,603 crore for December quarter, down 10 per cent from the same period last year on the back of increased expenses which jumped due to higher raw material cost such as iron ore and coking coal.

The topline for the October-December quarter stood at Rs 20,318 crore, up 11 per cent over same period last year, mainly due to higher realisations achieved through long-term contracts, improved sales in domestic market and a better product mix, even as domestic steel prices were lower in the period under review. 

In terms of volumes, the company took a hit as exports declined 70 per cent year-on-year because of global surplus, China slowdown and trade measures taken by various countries. JSW Steel's exports form 10 per cent of the company's net revenue.

JSW Steel's saleable steel production in the quarter under review stood at 3.68 million tonne, down 7 per cent from last year. "The lost volumes are unlikely to be recouped during the fourth quarter and the company's overall sales volumes for FY19 is likely to fall short of guidance of 16 million tonnes by 2-3 per cent," said the company release.

According to Bloomberg estimates, the company's revenue was seen at Rs 20,918 crore in December quarter, while bottomline was expected to be at Rs 1,727 crore.

The company's EBITDA per tonne on a consolidated basis stood at Rs 12,441 as against Rs 9,557, while on a standalone basis it was at Rs 4,063, down from Rs 8,994 in the same period last year. In the period under review, the company's input costs rose by 20 per cent on a year-on-year basis, while the total expenses increased 11 per cent.

At the standalone level, the company's net profit was higher than consolidated bottomline at Rs 1,892 crore. "At the consolidated level, there is depreciation and interest from the global acquisitions in the US and Europe which has led to lower net profit," explained Seshagiri Rao, joint managing director and group chief financial officer at JSW Steel.

As on December 2018, JSW Steel's consolidated net debt stands at Rs 46,000 crore, with a debt-equity ratio at 1.4 and debt-EBITDA ratio at 2.32. This indicates JSW Steel has a strong balance sheet as it moves ahead with its expansion plans.

While the company's turnaround plan for insolvent Monnet Ispat is on track, it is also now eyeing the Odisha-based Bhushan Power & Steel Asset for which the company law appellate tribunal has upheld its bid offer.

"While we continue to go for inorganic expansion, our organic 10 million tonne greenfield project plan in Odisha remains intact. At present, we are waiting for communication from Committee of Creditors on Bhushan Power," informed Rao.

Going ahead, the management said JSW Steel's exports for FY19 could be lower than last year at 26 per cent due to weak demand from the global market.

Though the company will be keeping a close eye on sticky input costs, its commissioning of coke oven plant at Dolvi will help reduce the cost of production by Rs 4,000 per tonne as it will no more buy the one million tonne coke requirement from an open market. The total savings comes to Rs 400 crore per annum for the company.