JSW Steel Q4 profit plunges 49% to Rs 1,523 crore, margin contracts almost 20%

JSW Steel expects FY20 crude steel production at 16.95 million tonnes against 16.69 million tonnes in FY19 and sales volume at 16 million tonnes against 15.76 million in FY19.

India's largest steelmaker JSW Steel reported a 49.2 percent year-on-year decline in consolidated net profit at Rs 1,523 crore for the quarter ended March 2019.

"Cost of key inputs like power & fuel and consumables were higher due to rupee depreciation and higher electrode and refractory costs, part of which was offset by lower costs of raw materials like iron ore and coal," said the company in a statement.

Despite reporting a loss it exceeded analyst estimates which lifted stock over 4 percent at close on May 24.

A CNBC-TV18 poll estimated profit at Rs 1,435 crore on revenue of Rs 21,200 crore and EBITDA at Rs 4,197.5 crore with margin at 19.8 percent for the quarter.

Revenue during the quarter rose 4.8 percent to Rs 22,368 crore compared to the year-ago period, with sales volume rising 2 percent YoY to 4.29 million tonnes.

At the operating level, earnings before interest, tax, depreciation, and amortization (EBITDA) fell 16.1 percent to Rs 4,440 crore YoY and margin contracted to 19.8 percent, against 24.8 percent in the corresponding period last year.

The company expects steel demand in India to slow down moderately, from 7.5 percent in the last FY, to about 6.5-7 percent in the present financial year.

Demand had slowed down in key sectors such as auto and construction. But JSW Steel executives said that the industry circumstances were changing.

"A correction is happening in the inventory on auto companies. We expect the demand to improve in the second half of the year," Jayant Acharya, Director, Commercial & Marketing, said at a press conference in Mumbai.

In the construction sector too, Acharya added, projects are expected to come back and investment will improve, on the back of the just concluded  General Elections. With the NDA government getting an unprecedented mandate, the industry is expecting stability on the political and policy front.

The company also expects the price of iron ore, a key raw material in steel making, to cool down later in the year. Iron ore prices have increased by 40 percent since January, especially after a dam disaster forced the world's largest producer Vale to cut production.

"We expect more supply to come in," said Acharya.

JSW Steel expects FY20 crude steel production at 16.95 million tonnes against 16.69 million tonnes in FY19 and sales volume at 16 million tonnes against 15.76 million in FY19.

The company also approved fundraising up to Rs 14,000 crore.

On exports, the company said: "With an improvement in international demand and pricing of steel during the quarter, the company strategically shifted its focus to international markets in order to liquidate the accumulated stocks which were built at the end of the third quarter. As a result, exports during the quarter increased sharply and exports accounted for 22 percent of overall sales."

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