JSW Steel Result Review For The June Quarter 2012
DSIJ Intelligence / 27 Jul 2012
JSW steel yesterday announced its result for the June quarter 2012. The company managed to perform well despite weak macro environment
JSW steel yesterday announced its result for the June quarter 2012. The company managed to perform well despite weak macro environment. If we look at the result the net sales of the company on a consolidated basis increase by 33.23% on YoY to Rs 9901 crore while bottomline decline by 53% on YoY to Rs 350 crore. The significant decline in the bottomline was on the back of rupee depreciation which led to the Forex Loss of Rs 594 crore. Rupee depreciated by almost 15% during the quarter from the levels of 50 in the march 2012.
Meanwhile JSW Ispat subsidiary of JSW steel too announced its result and did well for the quarter. The company for the first time in last seven years showed profit of Rs 478 crore. However deferred tax asset of Rs 338 crore a nonrecurring item eat away most of profits. This too impacted the consolidated net profit of JSW steel. The net profit after associate’s loss stood at Rs 200 Crore only Vs that of 491 crore in the same period last year.
| Sales Volume and Realisation | |||||
|---|---|---|---|---|---|
| Particulars | June Qtr 2012 | June Qtr 2011 | YoY | Mar Qtr 2012 | QoQ |
| Net sales | 9030 | 7064 | 28 | 9511 | -5.1 |
| Sales Volume | 2.1 | 1.71 | 23 | 2.31 | -9.1 |
| Realiasation | 43000 | 41310 | 4 | 41173 | 4.4 |
However company did well on the operating side. Despite modest demand and some pressure from the pricing side the operating profit of the company grew by 24% on YoY to Rs 1772 crore. The EBITDA Margin remained intact at 20 Per cent as compare to the same period last. This was largely on the back of jump in the sales volume and marginal increase in the realization during the quarter. The sales volume jumped by 27% on YoY basis to 2.14 Mn tonne as compare to same period last year. Also due to better product mix and firm steel prices the realization improved by 4% on YoY to Rs 43000/tonne. The company maintained the capacity utilization at 80% as it is still facing the issue of low grade iron ore and logistic issues.
| Standalone financial Performance of the company | ||||||
|---|---|---|---|---|---|---|
| Particulars | Q1FY13 | Q1FY12 | YoY | Q4FY12 | QoQ | |
| Sales (Rs Cr) | 9030.17 | 7064 | 27.8 | 9511 | -5.1 | |
| Raw material cost | 5793 | 4348 | 4694.0 | 5895 | -1.7 | |
| Power& fuel | 512 | 381.42 | 34.2 | 482.67 | 6.1 | |
| EBITDA | 1772.79 | 1425 | 24.4 | 1652 | 7.3 | |
| EBITDA/Tonne | 8442 | 8333 | 1.3 | 7152 | 18.0 | |
| Sale volume (Mn Tonne) | 2.1 | 1.71 | 2.3 | 2.31 | -9.1 | |
| Realization Rs /tonne | 43000 | 41310 | 4.1 | 41173 | 4.4 | |
| PAT | 269 | 833 | -67.7 | 752 | -64.2 | |
| OPM | 19.6 | 20.2 | -0.5 | 17.4 | 2.3 | |
| NPM | 3.0 | 11.8 | -8.8 | 7.9 | -4.9 | |
In conversation with Jayant Acharya Director of JSW steel he accepted that there was some correction of 3% in the long steel prices during the quarter while flat steel prices remained firm in the domestic market. And due to better product mix and higher sales of value added products the company was able to maintain its margins during the quarter.
On the Iron Ore procurement, management stated that at presently they have enough iron ore to operate the plant till March 2013 at 80% utilization rate. And to meet its further requirement company has submitted the R&R plan for the Seven A categories mines allocated for mining by the Supreme Court. However there is some documentation that is to be completed and once that is completed one can expect mining to start from the Month of August. This will be a bigger relief for the company as these mines have high grade of Iron Ore which will reduce the overall cost of production. It is to be noted that Lower grade of Iron Ore increases the cost as the volume of consumption increases as compare to high grade Iron Ore.
In conclusion we believe despite global Weakness in demand and Price both the company has done well during the quarter. Also there is some relief from the raw material side, as Coking coal prices have come down to $220/ tonne. Also Iron ore prices in the international markets have come down to $120/ tonne vs. that of $150/tonne. Falling Iron Ore prices will also help the company in the coming month.
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