Q4 Results: JSW Steel’s Profit Halves As Margin Contracts

JSW Steel Ltd.’s quarterly profit fell by half as the steelmaker’s operating margin dropped.

Net profit fell 50 percent year-on-year to Rs 1,523 crore for the January-March period, according to its stock exchange filing. Yet, it was in line with the Rs 1,489-crore consensus estimate of analysts tracked by Bloomberg.

• Revenue rose 4.8 percent to Rs 22,368 crore.
• Operating profit fell 16 percent to Rs 4,440 crore.
• Operating margin narrowed nearly 500 basis points to 19.85 percent.

Lower steel prices during the quarter impacted operational performance of the Sajjan Jindal-led company. The domestic steelmakers are staring at twin headwinds as the world’s largest producer ArcelorMittal SA cut output amid a slowdown in demand and prices of iron ore, the key raw material, surge. Other iron ore producers such as BHP, Rio Tinto and Fortescue Metals Group, too, cut their production guidance for the year.

Edelweiss research had raised concerns for the ferrous companies amid higher imports in January, and muted demand in the auto sector, which contributes 20 percent to the total steel consumption in India.

Still, JSW Steel expects a 1.5 percent growth in crude steel sales and production in financial year 2019-20, according to its statement. It expects to expand crude steel capacity to 24 million tonnes by March 2020 from 18 million tonnes, Seshagiri Rao, joint managing director and group chief financial officer, had told Bloomberg in April. The steelmaker is also raising $500 million through five-year overseas bonds to expand capacity, he said.

Shares of JSW Steel rose as much as 5.6 percent to Rs 291.50 apiece after the earnings announcement compared to a 1.6 percent advance in the benchmark Nifty 50 Index.