JSW Steel Q1 Standalone Earnings Disappointing

JSW Steel Ltd. reported its first profit drop in six quarters as input costs rose and its customers cut stock ahead of the implementation of the Goods and Services Tax (GST). But, the numbers were higher than analyst estimates.

Net profit fell 43 percent to Rs 624 crore in the April-June quarter compared to the corresponding period last year, the country's largest steelmaker said in a stock exchange filing on Tuesday. The analyst consensus estimate tracked by Bloomberg stood at Rs 471 crore. Revenue of the the steel maker increased more than 25 percent to Rs 14,479 crore on a year-on-year basis.

Industry wide de-stocking by customers, especially for long products and trade sales, weighed on domestic sales volumes, the company said in its media statement. Sales volumes for the quarter rose 5 percent to 3.51 million tonnes on a year-on-year basis.

Earnings before interest, taxes, depreciation and amortisation (EBITDA) declined nearly 20 percent to Rs 2,617 crore on a year-on-year basis. EBITDA per tonne came in at Rs 6262/tonne, way lower than our estimate of Rs 6,500/tonne. The operating profit margin contracted to 18.07 percent from 28.17 percent last year but still surpassed analyst estimates.

JSW Steel's debt-to-equity increased 1.97 times from 1.85 times on account of increased cost pressure.

Read: JSW Steel's Lower Production Not A Setback, Says Group CFO

Price Hike Coming?

Iron ore prices in India remained at elevated levels, putting pressure on costs, JSW Steel said. The company's total costs rose nearly 40 percent on a year-on-year basis. Higher-priced coking coal inventories boosted the cost of production, pointing to scope for increasing prices in the local market, JSW Steel's Joint Managing Director Seshagiri Rao told reporters at the press conference to announce earnings.

The company maintained FY18 production and sales guidance at 16.5 million tonnes and 15.5 million tonnes respectively. It expects demand to improve on higher government spending in transmission lines and solar projects, Rao said.

The steelmaker has passed on the benefits of the GST to its customers and expects the impact to stabilise by the July-September quarter.

JSW Steel's board on Tuesday approved raising up to Rs 5,000 crore through the issue of debentures, the company said in its exchange filing. The company is looking to buy stressed assets like Monnet Ispat Ltd. Rao told reporters. The bid by the Sajjan Jindal-led JSW Group to take over the debt-ridden company is not acceptable in its current form, lender State Bank of India had told the National Company Law Tribunal in a previous hearing.