The uncertainties in the global market, which started with imposition of tariffs by the US on imports of steel and aluminium, have led to JSW Steel increase its focus on the domestic market. Therefore, though the consolidated quarterly sales of 3.91 million tonnes is lower by 1 per cent y-o-y, domestic sales grew at a healthy rate of 11 per cent compared to the same period a year ago. The company’s exports accounted for 17 per cent of the total sales in the quarter, down from 26 per cent in the year ago period.

JSW Steel’s consolidated revenue from operations increased by 25 per cent y-o-y to ₹21,552 crore in the September 2018 quarter. This is on the back of increased price realisations which have gone up by 25 per cent y-o-y aided by higher global steel prices and currency depreciation.

This along with a leash on costs helped the company to record higher operating margins in the quarter; this increased to 23 per cent from 18 per cent in the year-ago period. Higher sales in the high margin automotive segment (rise in volumes of 36 per cent y-o-y) also contributed to the growth in margins.

Sequentially though, operating margin reduced from 25 per cent in the June 2018 quarter to 23 per cent in the September quarter. This can be attributed to flat realisations and increase in the costs of key inputs like iron ore, coal, and natural gas.

The net profit in the quarter increased by 150 per cent y-o-y to ₹2,087 crore.

Going forward

At the current run rate, the company is short of achieving its guidance of 16.75 million tonnes and 16 million tonnes per annum of production and sales respectively set for the current financial year. But the management expects to cover the shortfall in the second half of the year which is generally considered better for the industry.

With contribution from the recent acquisitions made in Italy and the US expected to start in the fourth quarter of the fiscal, there could be a boost to profits.

Also, the pipe conveyor at Vijayanagar which facilitates transportation of iron ore from mines to the plant is expected be commissioned in the third quarter of this fiscal. This pipeline conveyor that will replace truck transportation is expected to benefit the company to the tune of ₹300-500 per tonne.

Monnet Ispat taken over

Monnet Ispat has been taken over by the consortium of JSW Steel and Aion Capital in this quarter. JSW Steel is focussing on restarting Monnet’s pallet plant and blast furnace in the next quarter and enable full capacity utilisation of 1.5 million tonnes per annum shortly. This will take JSW Steel’s total capacity to 19.6 million tonnes per annum.

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