JSW Steel Q3 net profit down 10% to Rs 1,603 crore, hurt by steep fall in exports

Higher sales in the domestic market couldn’t make up for the steep fall in exports, as steel major JSW Steel on Thursday reported a 9.96 percent fall in consolidated net profit in the third quarter of the financial year.

Its net profit stood at Rs 1,603 crore for the October-December quarter of 2018-19, compared to Rs 1,774 crore in the year-ago period.

“Exports declined by 70 percent in the quarter, and accounted for only 10 percent of the total sales,” said Seshagiri Rao, Jt Managing Director and Group CFO of JSW Steel.

Total sales, thus, was down 7 percent from a year ago, at 3.68 million tons.

The country’s largest steelmaker increased its total income by 11 percent to Rs 20,355 crore from Rs 18,306 crore, a year ago.

“Surplus steel, waning demand in China, tight financial condition and escalating trade wars have led to softening of demand and prices,” added Rao, in an interaction with media post the results announcements.

Total expenses too increased almost 11 percent to Rs 17,916 crore during the December quarter of 2018 as against Rs 16,188 crore in the corresponding period of the previous fiscal.

On the domestic front though, JSW Steel increased its market share to 13.7 percent in the third quarter, up by 0.8 percent a year ago, with its sales in the home market increasing by 15 percent year-on-year.

Shares of the company on February 6 ended 2.06 percent up at Rs 279.30 a piece on the BSE.

Outlook

The slowing export will continue to cloud over the company’s sales for the rest of the financial year.

JSW Steel, in its guidance, said that it will fall short of its annual sales guidance of 16 million tons, by 2 to 3 percent.

But add Rao was optimistic of the realisations holding strong. A cut in supply of iron ore in the international market is expected to push up the steel prices.

At the same time, JSW Steel may not have to pay as much for the raw material, thanks to a supply glut in the domestic iron ore industry.

It also helps that production in China has been slowing down since November last year, reducing prospects of over supply in the domestic market, and hopefully lower imports into India.

But the risk of imports will continue. In the third quarter, steel imports had increased by nearly 8 percent, even as overall exports from India fell 40 percent. Steel consumption grew by 8.1 percent, said a release by JSW Steel.

The company is hoping that the consumption stimulus of Rs 1 lakh crore, which was announced in the Union Budget, will help drive steel demand in the domestic market.
The Budget, announced on February 1, included monetary support for farmers and pension for workers in the unorganised segment.

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