JSW Steel Q2 Results: Profit Jumps 21% Even As Raw Material Costs Rise

JSW Steel Ltd.’s second-quarter profit jumped beating estimates despite higher costs of inputs like iron ore, coking coal and power.

The steelmaker’s consolidated net profit rose 21.4% sequentially to Rs 7,170 crore in the three months ended September, according to its exchange filing. That compares with the Rs 5,744.2-crore consensus estimate of analysts tracked by Bloomberg.

The company saw a sharp jump in other income from Rs 946 crore in the second quarter compared to Rs 198 crore in the first quarter. That came amid fair valuation gains on re-measurement of the company's optionally fully convertible debentures in one of its joint ventures, it said in its notes to accounts.

Q2 Highlights (QoQ)

• Consolidated revenue rose 12.5% to Rs 32,503 crore, against the Rs 32,108.6-crore forecast. That was led by improved product and market mix.

• Operating profit rose 1.4% to Rs 10,417 crore, compared with a forecast of Rs 10,452 crore. That was driven by higher realisation, reliance on exports and stable volumes. Pricing power of the overseas subsidiary also aided the performance.

• Ebitda margin contracted to 32% from 35.5%.

• 3.79 million tonnes of saleable steel was sold in the second quarter, a 5% rise over the preceding quarter.

Ebitda Performance Of Overseas Units

• Ohio unit reported operating profit $48.3 million vs Ebitda profit of $19.03 million.

• U.S. plate and pipe mill operating profit of $13.16 million vs $24.45 million.

• Italy arm reported Ebitda profit at Euro 6.1 million vs EBITDA loss of Euro 4.76 million.

Other Highlights

• Net debt-to-equity: 0.92x.

• Net debt-to-Ebitda: 1: 1.58x.

• Sales rose 4.8% quarter-on-quarter to 3.79 million tonnes.

• Domestic sales up 4% sequentially as demand affected by monsoon; exports increased 22%.

• Domestic automotive sales rose 9% over the preceding quarter.

Highlights Of Interaction With Seshagiri Rao, Joint Managing Director

• See slowing demand from China but growth in rest of the world.

• Signs of demand recovery in India, especially from construction and infrastructure sectors.

• Exports to account for 10-25% of overall volumes for the financial year and moderate in the second half of the fiscal.

• Other income of Rs 702 crore is one-time in nature.

• See exceptionally severe cost inflationary pressures, especially in coking coal prices.

• Additional cost pressure of $100 a tonne to be absorbed in Q3.

• Ebitda to improve in Q3 due to cost-saving measures.

• Iron ore prices are at discount to 10-15% from international prices.

• Iron ore prices to further head lower due to reducing demand in China.