JSW Steel Ltd’s fiscal first-quarter profit surged on cost savings, higher exports and better volume, sending its shares higher.
The company reported its highest ever volumes, receiving a boost from increased capacity and a 39% rise in exports. Restating the numbers in accordance with the new Indian Accounting Standards also worked in favour of JSW Steel.
Net profit rose to Rs.1,109 crore for the quarter ended 30 June from Rs.21.19 crore a year earlier. Consolidated revenue from operations rose 2.2% to Rs.12,720.19 crore from Rs.12,447.46 crore in the year-earlier quarter. Exports made up 19% of total revenue.
The results beat average analyst estimates. 13 analysts polled by Bloomberg had expected JSW Steel to report consolidated net profit of Rs.742 crore on revenue of Rs.12,311.30 crore.
During the quarter, JSW Steel’s stand-alone crude steel production rose by 14% to 3.87 million tonnes (mt). Saleable steel volume for the quarter also rose about 8% to 3.34 mt.
Total expenses in the quarter fell 11.3% to Rs.10,447.85 crore. The company plans to further reduce costs from areas such as logistics.
Operating Ebitda (Earnings before interest, tax, depreciation and amortization) rose about 92% to Rs.3,269 crore during the June quarter. Ebitda per tonne was higher by about 70% at Rs.9,200.
“This was one of the best quarters for the company, but going forward a key disappointment could be a drop in realization. Ebidta per tonne could be lower in coming quarters,” said SBI Cap Securities analyst Jimesh Sanghavi.
Unprecedented inflow of steel imports from steel-surplus countries such as China, Japan and South Korea have hurt domestic steel companies such as JSW Steel, forcing them to take a series of price cuts, squeezing margins.
“Cost reduction and volume growth were the drivers for growth in the quarter... There is pressure on prices as demand is not good, so there could be some price reductions in the current quarter,” said joint managing director and chief financial officer Seshagiri Rao.
Rao said international steel prices have started coming down since May, forcing prices in India to correct through the months of June and July. Steel production in India rose by 4.8% in the June quarter, but demand has remained flat in this period due to higher steel imports, he said.
JSW Steel said it would bid for all of the 14 so-called Category-C iron ore mines likely to be auctioned in Karnataka in August.
The company on Wednesday also reaffirmed its forecast of a 25% growth in volume, to 15.75 million tonnes per annum (mtpa) of crude steel, and sales of 15 mtpa of saleable steel for fiscal 2017 as India’s long-term outlook for the steel sector remains bright. It plans to have 40 mtpa of steel-making capacity by 2025.
JSW Steel’s shares closed at Rs.1,738.30 each, up 4.75%, on the BSE on Wednesday.