JSW Steel net profit falls 37% to Rs 1,595 crore in Q2

JSW Steel reported a sharp year-on-year decline of 37% in its consolidated net profit at Rs 1,595 crore in the September quarter.

The company had a tax expense of Rs 910 crore during the quarter, which led to a lower net profit. Operationally, it reported a strong quarter on the back of higher demand for steel after revival in business activity.

Consolidated revenue from operations rose nearly 10% to Rs 19,264 crore due to a strong pick-up in saleable steel volumes. Overall, sale volumes increased by 17% y-o-y to 4.15 million tonnes. The recovery was much sharper on a sequential basis, with volumes up 49%.

Domestic sales grew 22% y-o-y and about 2.5 times quarter-on-quarter on the back of strong recovery in domestic demand. Automotive steel sales increased by 33% y-o-y, despite an overall decline in domestic automotive production by 7%.

Overall value added and special products, which account for 51% of overall volumes, grew by 29% y-o-y, mainly driven by strong automotive sales and increased offtake from consumer packaging, appliances and solar segment. The company maintained its annual guidance of achieving 15 million tonne of saleable steel.

“The second quarter witnessed a sharp rebound in business sentiments and a significant improvement in the domestic economic activities spurred by a slew of monetary and fiscal initiatives. The company achieved an average capacity utilisation level of around 86% for the quarter. This is in line with that of pre-Covid levels of 85% achieved in the second quarter of the previous year,” JSW Steel said in a statement.

The company had reported utilisation levels of 66% in the June 2020 quarter. Crude steel production in the July-September period stood at 3.85 million tonne.

As domestic steel demand rebounded, the company moderated its exports to 28% from 57% in Q1FY21. It also reported strong growth in consolidated Ebitda, which surged by a sharp 61.6% y-o-y at Rs 4,414 crore. Operating costs were down primarily on account of lower prices of imported coal, better operating leverage and savings in procurement costs and fixed overheads. However, this benefit in cost was partially offset by an increase in iron ore prices. The increase in the net sales realisation and fall in operating costs led JSW Steel to achieve a healthy Ebitda margin of nearly 23% in the September quarter. The margin was up 740 basis points on a y-o-y basis.

With improvement in the availability of workforce at all locations, project activities have picked up momentum. At Vijayanagar, the 1.2 MTPA wire rod mill has been successfully commissioned and trial production is under way. The construction of the 8 MTPA pellet plant is progressing well and is expected to be commissioned in the December quarter.

The company’s consolidated net debt to equity ratio stood at 1.43x at the end of the September quarter as against 1.54x at the end of the June quarter. The net debt to Ebitda was at 4.73x versus 5.74x at the end of the preceding quarter. The company’s net debt stood at Rs 52,892 crore as on September 30, compared to Rs 54,527 crore as on June 30.

JSW Steel said a broad-based economic recovery is underway in India with business sentiment improving substantially over the recent months. “Manufacturing activities reflects a strong rebound, and the service sector is gradually stabilising. The recovery in automotive sector, notably in two-wheelers and passenger vehicles, is better than anticipated. The rural economy is resilient. Further structural reforms like the farm bill augur well for the rural sector,” it said.