JSW Steel Ltd on Wednesday reported a 174% jump in its consolidated net profit due to lower expenses on account of a drop in the material costs and increase in domestic volumes.
Net profit for the three months ended 31 March stood atRs.171.25 crore compared with Rs.62.38 crore in the year-ago period. Net sales fell 15.3% to Rs.10,471.21 crore from Rs.12,364.36 crore.
The firm’s earnings surprised the street which was expecting a loss. A Bloomberg poll of 17 analysts had forecast a net loss of Rs.141.5 crore for the quarter. Nineteen analysts had estimated net sales at Rs.10,360.1 crore.
For the March quarter, the company’s total costs fell 18.18% to Rs.9,667 crore from Rs.11,815.33 crore a year ago, driven by lower raw material costs. Finance cost fell 2.9% to Rs.833.46 crore.
For 2015-16, the firm reported a net loss of Rs.741.95 crore and net sales of Rs.41,217.30 crore.
JSW Steel reported an ebitda (operting earnings before interest, taxes, depreciation and amortization) of Rs.1,825 crore for the quarter. Ebitda per tonne was at Rs.5,400, similar to what it was a year ago.
“The sequential improvement in ebitda is the volume growth effect,the real impact ( post minimum import price) will show in the next financial year(2016-17),” said Seshagiri Rao, joint managing director and group chief financial officer, JSW Steel.
For the December 2015 quarter, the company had reported an Ebitda per tonne of Rs.3,400.
“The Ebitda performance has been a surprise as the company has managed to cut costs mostly on the raw material prices. For the June quarter, performance will depend on the volatility of both raw material prices and the prices of finished steel,” said Goutam Chakraborty, an analyst at Emkay Global Financial Services.
During the March quarter, JSW Steel increased its steel-making capacity from 14.3 million tonne (mt) to 18 mt.
Saleable steel volumes for the quarter also rose 7% to 3.28 mt, further improving the company’s financial performance. In line with its revised guidance for 2015-16, the company’s total saleable steel production was at 12.13 mt.
The company has aimed at a 26% increase in total saleable steel production at 16 mt for the current financial year due to its newly commissioned capacities.
From the domestic steel market, the company expects a 6% increase in steel demand in 2016-17, higher from 4.5% in the last fiscal, due to a rise in government expenditure.
Over the next two financial years, the firm will spend Rs.7,000 crore as capital expenditure, of which Rs.4,300 crore would be used in 2016-17 for construction of a raw material pipeline, a tin plate mill, water reservoir and similar assets.
JSW Steel looks to bid for all of the 14 so-called Category-C iron ore mines likely to be auctioned in Karnataka this year.
JSW Steel is one of the seven shortlisted bidders for Tata Steel Ltd’s UK steel assets. The company did not share any rationale for its interest in these assets.
“The interest is exploratory in nature,” Rao added.
Jayant Acharya, director (commercial and marketing) for JSW Steel, said the company will not take any of the pension liabilities.
The company’s consolidated debt as on 31 March wasRs.38,461 crore.
Rao added that JSW Steel will look to reduce its average cost of capital by 50 basis points from the present 7.16%. “Fundraising options would be for debt refinancing purposes,” Rao said. He did not share any specific refinancing option.
One basis point is one-hundredth of a percentage point.
The board has recommended a dividend of Rs.7.50 per share and approved raising Rs.3,000 crore via sale of debentures. The funds will be used to replace rupee bonds and to meet working capital requirements and capital expenditure, the company said in a notice to BSE.
On Wednesday, Shares of JSW Steel closed at Rs.1,310.35 apiece on the BSE, up 1.45% from the previous close. The benchmark Sensex fell 0.27% to close at 25,704.61 points.
Source: Livemint