Portfolio

JSW Steel: Weak realisations exert pressure

Satya Sontanam BL Research Bureau | Updated on January 24, 2020 Published on January 25, 2020

In the quarter ending December 2019, JSW Steel’s performance was hit by theeconomic slowdown .

Consolidated revenue fell by about 11 per cent to ₹18,055 crore over the same period a year ago ( year-on-year/y-o-y), while net profit fell by a whopping 88 per cent to about ₹187 crore y-o-y. A steep drop in realisations in the quarter exerted pressure on profit despite a fall in prices of key raw materials — iron ore and coking coal.

JSW Steel reported a consolidated operating profit of ₹2,451 crore for the quarter ended December 2019 (down 46 per cent Y-o-Y). The consolidated operating profit margin of the company fell to about 14 per cent in Q3 FY20, compared to 22 per cent, a year ago.

Domestic realisations fall

Despite a 10 per cent increase in the company’s standalone volumes in the December quarter, standalone revenue stood at ₹15,767 crore, a decline of 14 per cent .

The company shifted its focus back on Indian markets in the December 2019 quarter to cater to improved demand. But the lag effect of low steel prices in the second quarter of the fiscal and contracts inked by the company for automotive steel in October when steel prices were weak, impacted the company’s realisations.

The recovery in steel prices in November and December of 2019 was of no help. The company’s realisations during the quarter stood at ₹39,221 per tonne against ₹49,981 a year ago.

It had earlier increased its share of exports in the first two quarters of this fiscal due to the lull in domestic demand.

The share of exports stood at 24 per cent in Q3 FY20 compared to 31 per cent in the previous quarter.

Overseas businesses drag

Also, continued weakness in the overseas businesses of the company impacted the consolidated profit of the company.

In Q3 FY20, US Plate and Pipe Mill, JSW Steel USA Ohio and JSW Steel Italy (Aferpi) pulled down consolidated profits by $12.6 million (about ₹90 crore), $ 25.19 million (about ₹179 crore) and Euro 9.95 million (about ₹79 crore), respectively.

Published on January 25, 2020
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