JSW Steel's Q3 PBT falls 82% at Rs 436 crore on weak realisations

Sajjan Jindal-led JSW Steel reported a consolidated profit before tax (PBT) of Rs 436 crore in the December quarter, down 82 per cent from same period last year. This came on the back of weak realisations along with 5 per cent drop in production due to extended monsoon, which impacted operations at both the Dolvi and Vijaynagar facilities.

Net sales in the period under review tumbled 23 per cent on a year-on-year (YoY) basis as the company’s top line stood at Rs 17,416 crore, down 12 per cent from the corresponding period last year.

Even as costs in the December quarter moderated by 15 per cent due to lower coking coal prices, it was unable to lend firm support to the earnings before interest, tax, depreciation and amortisation (Ebitda) per tonne reported at Rs 6,622. 

This was almost half of the Rs 12,224 in the same period last year. Sequentially, the Ebitda per tonne in the December quarter was lower from Rs 7,767 noted in the September quarter.

The company’s consolidated operating Ebitda stood at Rs 2,451 crore while its standalone operating Ebitda was at Rs 2,667 crore in the December quarter.

The company’s consolidated net profit for the December quarter stood at Rs 187 crore, down 88 per cent from same period last year.
 

According to Bloomberg estimates, JSW Steel was expected to have a bottom line of Rs 421 crore and clock a top line of Rs 17,686 crore in the quarter gone by. The management informed of moderation in exports during the quarter as demand for restocking picked up in the domestic market where consumption improved 25 per cent sequentially.

Retails sales went up 33 per cent and original equipment manufacturers (OEM) demand also increased 21 per cent on a quarter-on-quarter basis. This helped the company lower its inventories by 13 per cent, sequentially.

“Going ahead, we are watching the domestic steel demand scenario and expect exports in the final quarter of the fiscal to come down further from the December quarter,” said Jayant Acharya, director commercial at JSW Steel.

Demand from the infrastructure and construction segment is looking up. Alongside, projects, which were held up during monsoon, are also beginning to roll-out, said the management. With regard to demand from the auto sector, the management said it remains cautiously optimistic on the same.

Going ahead, the company sees room for further increase in domestic steel prices and is also optimistic about meeting production and sales guidelines for FY21which stands at 16.5 million tonne and 15.5 million tonne, respectively.

“We need to see how domestic demand sustains as there is definitely room for prices to inch up as global prices of steel continue to rule at a higher level,” said Acharya.

While the company aims to meet its Rs 11,200 crore capex for FY21, Seshagiri Rao, joint managing director and group chief financial officer, said, “There could be a delay of 3-4 months for expansion of the Dolvi plant where capacity of 5 million tonne is getting added.”

As on December 31, the company’s net debt stands at Rs 49,550 crore, which is down 30 basis points sequentially and 50 basis points YoY.

“Since November 2019, we are seeing net sales realisations picking up and costs not going higher. So, we are hoping that the current quarter (January-March) will turn out to be better than Q3 (quarter ended December),” said Rao.