JSW Steel Q3 PAT down 30% at Rs 329 cr y-o-y

Margins shrink on low steel prices, high input cost

JSW Steel, India’s leading steel company, reported a consolidated net profit of Rs 329 crore in the December quarter, down 30 per cent year-on-year, mainly due to higher finance cost and lower steel prices.

The company clocked sales worth Rs 13,222 crore, down three per cent from last year. By Bloomberg estimates, the net profit was seen at Rs 415 crore, while sales were expected at Rs 13,201 crore. “Falling steel prices, a rise in imports from China and Russia, and input costs pressured the performance,” Seshagiri Rao, joint managing director and group chief financial officer, said.

Internationally, iron ore prices have declined by 50 percent from January 2014 to January 2015, while in the domestic market, prices have jumped 14 percent during then same period.

However, all other costs including depreciation were also up. Thus, the decline in total expenditure was 1.68 per cent (lower than decline in sales).

The pressure on company’s performance was also evident from its EBITDA per tonne which declined to Rs 7,000 per tonne in the period under review from Rs 7,700 per tonne in the corresponding period last year and Rs 7,900 in the preceding quarter.

Its EBITDA in the December quarter stood at Rs 2,296 crore, down 4.7 percent from same period last year.

“Though the overall EBITDA took a hit, that at the Dolvi unit was better than EBITDA recorded at the Vijaynagar plant due to the captive usage of pellets and coke (at Dolvi),” said Rao.

The company’s finance cost rose 18 percent on year-on-year basis to Rs 936 crore in the period under review with pre-payment of part of loan being one of the reasons, said the management. The pre-payment led to some additional interest payments. The consolidated net debt of JSW Steel stands at Rs 39,563 crore.

The company is in the advance stage of commissioning the expanded capacity at Dolvi unit to 5 million tonne from 3.3 million tonne now by September.

Going ahead, the company is looking for relief on pricing of iron ore and is also hopeful that the government will take the needed steps to clamp imports from Russia and China.

“We are looking at a Rs 1,200 per tonne fall in iron ore prices from NMDC,” said Jayant Acharya, director – commercial and marketing.

Currently, the company is partly meeting its iron ore requirement via imports from Brazil, South Africa and Canada.

Despite a weak domestic demand scenario for steel, JSW is running its Vijaynagar plant at almost 90-100 percent capacity utilization.

“We plan to lay thrust on increasing our value added products so that we get that extra mileage in the domestic market for our products even if overall demand remains weak,” said Vinod Nowal, deputy managing director of JSW Steel.

Value added products constituted 35 percent of total product portfolio in quarter gone by from 25 percent in the same period a year ago.