JSW Steel: Weak exports take a toll on volumes

Satya Sontanam BL Research Bureau | Updated on February 06, 2019

Sequential profit performance suffers due to pricing pressure


JSW Steel’s exports continued to fall for in the December 2018 quarter.

The company’s share of exports in the total sales has fallen sharply from 17 per cent in the September 2018 quarter and 30 per cent in the same period a year ago, to 10 per cent in the quarter ending December 2018.

The decline in exports led to overall sales volume coming down by 10 per cent y-o-y to 3.62 million tonnes. The declining trend in exports is not unique to JSW Steel; total steel exports from the country have fallen by about 40 per cent y-o-y to 2.16 million tonnes in the December 2018 quarter. This is on account of weak demand due to the slowdown in China, the world’s largest producer and consumer of steel.

However, due to improved average realisations and on the back of higher steel prices compared to a year ago and currency depreciation, JSW Steel’s consolidated revenue increased by 11 per cent y-o-y to ₹20,318 crore.

Operating profit, too, increased by 17 per cent to ₹4,501 crore. This is despite prices of raw materials such as iron ore and coking coal going up by 6 per cent and 7 per cent y-o-y respectively. The operating margins improved marginally to 22 per cent from 21 per cent a year ago.

The net profit, though, dipped about 10 per cent y-o-y to ₹1,603 crore on unusual lower taxes in the year-ago period. On a sequential basis, JSW Steel’s performance was weaker despite the second half of the fiscal generally considered to be better than the first.

Compared with the September 2018 quarter, the company’s consolidated revenue and operating profit fell 6 per cent and 8 per cent, respectively. This is due to the softening of realisations from the previous quarter and skewed supply-demand dynamics globally and at home.

According to the management, domestic sales were impacted by increased imports into the country.

The weakness in demand is expected to continue. The company stated that the shortfall in volumes was unlikely to be recouped during the fourth quarter and that the company’s overall sales volumes for FY2019 are likely to fall short of the guidance of 16 MTPA by 2-3 per cent.

Published on February 06, 2019

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