7 February 2019: JSW Steel on Wednesday reported a 10% year-on-year drop in its consolidated net profit for the October-December quarter at Rs 1,603 crore after the steel producer incorporated the financials of companies acquired in US and Italy during the financial year. The finance cost rose by 10.61% on year to Rs 1,061 crore, while depreciation and amortisation for the December quarter was up by 26.5% on year to Rs 1,078 crore.
“The interest and depreciation from acquisitions made in Italy and US have impacted the financials at the consolidated net profit level. The Ebitda has, however, gone up by 16.9% during the quarter to Rs 4,501 crore,” Sheshagiri Rao, joint MD and group CFO, told reporters.
The steel company’s subsidiaries, JSW Steel USA Ohio reported an Ebitda loss of $10.55 million in the December quarter, while JSW Steel (Italy) Srl Aferpi, reported an operating loss of €7.36 million for the December quarter.
JSW Steel’s operating margins improved by 107 basis points to 22.15% in the December quarter as the realisations on per tonne basis improved on long-term contracts, Rao said.
The realisations were further aided by selling more in the domestic market, and a better product mix, Rao added. The consolidated Ebitda/tonne in the December quarter rose 29.63% on year to Rs 12,441 from Rs 9,597 a year ago. However, the cost of raw material consumed during the quarter was up at Rs 11,611 crore compared with Rs 9,695 crore a year ago.
JSW Steel’s consolidated crude steel production during the quarter increased by 3% on year to 4.23 million tonne aided by higher capacity utilisation at both Vijayanagar and Dolvi. “With nine months production at 74.7% of FY19 guidance, the company is on track to achieve the crude steel production guidance of 16.75 mtpa for FY19,” Rao said.
The demand in domestic market during the December quarter was firm and the company focused on increasing the sales in domestic market leading to 15% year-on-year increase in domestic sales. However, exports during the quarter dropped 70% on year led by muted demand and weak pricing.
Overall, the steel sales volume dropped 7% on year to 3.68 million tonne during the quarter, while saleable steel sales fell 10% on year to 3.62 million tonne. The steel producer may fall short of its FY19 sales volume guidance of 16 mtpa by 2-3% as it is unlikely to recoup the lost volumes in the fourth quarter.
However, the company believes the steel prices will improve globally on account of increase in input costs, which may help the company to reduce its inventory in the March quarter. “The steel prices across geographies have already increased by $40/tonne in the January-March quarter of 2019,” Rao said.
As on December 31, the net debt rose to Rs 46,000 crore from Rs 44,800 crore in September on account of higher inventory cost. Net debt to equity was lower at 1.40 times at the end of Q3FY19 against 1.46 time at the end of Q2FY19. The company is waiting to receive the letter of intent from the CoC of Bhushan Power and Steel, which was taken to NCLT for insolvency proceedings.