JSW Steel Q2FY13 Net Profit Up On Forex Gains
DSIJ Intelligence / 29 Oct 2012
JSW Steel, one of the largest steel producing companies in India, has announced its results for the Sept 2012 quarter, wherein it has reported decent numbers.
JSW Steel, one of the largest steel producing companies in India, has announced its results for the Sept 2012 quarter, wherein it has reported decent numbers. The consolidated net sales of the company is up by 16.81% on a YoY basis and bottomline has seen a profit of Rs 691 crore as against a loss of Rs 669 crore in the same period last year.
| Financial Performance Sept Quarter 2012 | |||||
|---|---|---|---|---|---|
| Particulars | Sep '12 | Sep '11 | YoY (%) | Jun '12 | QoQ (%) |
| Sales | 9513.71 | 8144.26 | 16.8 | 9909.89 | -4.0 |
| Raw Material | 6611.69 | 5416.58 | 22.1 | 6362.02 | 3.9 |
| Power And Fuel | 515.53 | 450.62 | 14.4 | 529.36 | -2.6 |
| Interest | 482.9 | 307.62 | 57.0 | 460.5 | 4.9 |
| Forex gain/Loss | 424 | -486 | |||
| Net Profit / Loss | 617.29 | -571.5 | 200.13 | ||
| OPM (%) | 16.33 | 17.48 | -1.2 | 19.51 | -3.2 |
| NPM (%) | 6.46 | -6.98 | 2.01 | 221.4 | |
The company has stated that the net profit figure was on the back of the forex gains of Rs 423 crore, minus of which the situation was very tight during the quarter in terms of raw material availability. Due to iron ore supply constraints, it could operate only at 80% of its utilisation capacity.
However, the jump in the net sales was largely on the back of higher capacity utilisation on a yearly basis, which resulted in a 15.4% YoY jump in the sales volume and 2.8% QoQ to 2.17 million tonne. However, the realisations saw a marginal increase, up by 1.2% on a YoY basis and down by 7% QoQ. As we mentioned earlier, there was a correction in the steel prices during the quarter on the back of a slowdown in demand due to the weakening economic situation and slackened infrastructure.
| Sale Volume & Realisations | |||||
|---|---|---|---|---|---|
| Particulars | Sept '12 | Sept '11 | YoY | Jun '12 | QoQ |
| Sales (Rs Crore) | 9513.71 | 8144.26 | 16.8 | 9909.89 | -4.0 |
| Sales Volume (Mn Tonne) | 2.17 | 1.88 | 15.4 | 2.11 | 2.8 |
| Realisations (Rs/tonne) | 43842.0 | 43320.5 | 1.2 | 46966.3 | -6.7 |
The company’s operating profit is up by 9% on a YoY basis to Rs 1558 crore, while its margins are down by 115 bps to 16.33%. The decline in the margins was due to the increase in raw material cost, which went up by 22.06% YoY. The international coking coal and iron ore prices have remained in the range of USD 140-170/tonne and USD 110-120/tonne respectively.
JSW has been one of the major casualties of the iron ore mining ban in Karnataka. However, the company has been able to procure a major chunk of its requirement from NMDC and the limited inventory pile in the Karnataka region. It got some relief after the Supreme Court allowed mining operations in some of the mines. However, as per the court’s order, the mining companies had to submit their Reclamation & Rehabilitation (R&R) plan to get approval.
Latest Update On Mining
On approval of the R & R plans by the Central Empowered Committee (CEC), 3 mines in Category ‘A’ (total capacity of 1.4 MTPA) have restarted production. The remaining 8 mines (total capacity of 3.3 MTPA) are in various stages of approval and are expected to commence production during the Oct-Dec 2012 quarter.
The R&R plans for 3 mines in Category ‘B’ are approved. Those for the remaining mines in this category are under preparation. However, the Hon’ble Supreme Court has stipulated certain conditions for Category ‘B’ mines to consider re-commencement of mining. The CEC has recommended cancelling the Category ‘C’mining licenses and auctioning them to end users.
On the near-term outlook, the company said that the global economic situation continues to remain challenging, with increasing uncertainties impacting the prospect of economic growth across geographies. At 1149 million tonnes, the world’s crude steel production for the first nine months of 2012 recorded a marginal growth of 0.6%.
It also said that the Indian steel industry has witnessed a subdued demand growth of 2.8% during the quarter versus 7.7% QoQ. However, the company said that while domestic steel demand is expected to be steady, rising imports and unavailability of mineral resources to Indian producers will be major deterrents, depriving the Indian steel industry a level playing field vis-a-vis its global peers.
To conclude, we believe that despite the global weakness in both demand and price, the company has done well during the quarter. In the coming quarter, we expect the company to report better numbers due to some pickup in the domestic demand and better realisations. Moreover, better availability of iron ore after the resumption of mines will bring some relief on the iron ore front. However, rising imports from the Free Trade Agreement countries will continue to hurt the sales of domestic steel companies.
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