Backed by a strong recovery in steel demand, JSW Steel on Friday reported a stellar set of numbers for the three months of October-December, as the net profit increased nearly 14 times on a year-on-year basis to Rs 2,669 crore.
Consolidated revenue from operations surged 21% y-o-y to Rs 21,859 crore on the back of strong pick up in saleable steel volumes. Overall sales volumes were slightly lower by 2% y-o-y and 5% sequentially at 3.95 million tonne, due to lower opening inventory driven by strong sales in the second quarter. However, domestic sales of 3.48 million tonne is the second best quarterly sales on record, up 13% y-o-y and 16% quarter-on-quarter on the back of strong momentum in domestic economy.
“Various high frequency economic indicators are better than the initial expectations pointing to a robust recovery. Growth in passenger vehicles and motorcycle sales, railway freight traffic, and electricity consumption is also strong,” the company said in a statement.
The company recorded highest ever quarterly sales of flat products, propelled by strong demand of coated products. Automotive steel sales increased by 57% y-o-y, while India’s domestic automotive production grew by 16% y-o-y. Consequently, exports were much lower during the quarter. Overall value added and special products sales were up 12% y-o-y, making up 57% of overall sales versus 51% in Q2FY21. This was mainly driven by robust automotive sales and increased off-take from industrial and engineering, solar and appliances segment.
“The domestic steel industry witnessed sharp demand recovery driven by restocking and higher demand from automotive, machinery, construction and infrastructure sectors aided by increased government spending. Specific policy initiatives such as production linked incentive schemes to encourage manufacturing in India and targeted stimulus packages to the MSME sectors,” the statement said. On the back of strong demand environment, JSW Steel improved average capacity utilisation level to about 91% for the third quarter, against 86% in Q2FY21, and 66% in Q1FY21. The company also said that it is on course to meet the annual guidance of 15 million tonnes of saleable steel sales, however, it is expected that crude steel production guidance achievement will be about 95% mainly due to constraints on iron ore availability in the country.
As the domestic steel demand rebounded from recent lows and gained momentum, the company further calibrated its export volumes to 12% of the total sales at 0.47 million tonnes, in order to service the Indian market. The company reduced inventories by 0.47 lakh tonnes during the quarter.
The company also reported strong growth in consolidated Ebitda (earnings before interest, tax, depreciation and amortisation) during the quarter which surged 142% y-o-y to Rs 5,946 crore. The spreads improved due to favourable change in geographical mix, product mix further supported by better realisations during the quarter. The enhanced spreads resulted in higher Ebitda margin, which also doubled y-o-y to 27.2% during the quarter.
The company reduced consolidated net debt by Rs 1,099 crore in the quarter. Consolidated net debt to equity stood at 1.29x at the end of the quarter versus 1.43x at the end of September 2020 quarter. Net debt to Ebitda stood at 3.53x against 4.73x at the end of Q2FY21.
On the outlook, JSW Steel said that a broad based economic recovery is underway in India with business sentiments improving substantially over the recent months. “There has been a strong growth in the automotive sector, notably in PV and 2-wheelers, and tractors due to strong rural demand. The recovery in residential real estate and continued traction in commercial real estate is a bright spot, with scope for structural revival of the sector,” it said in a statement.
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