JSW sees improved margins in Q4

Steel Insights Bureau

Rising steel prices and stabilising of input prices will help JSW Steel report improved margins in the fourth quarter of FY23, the company has said.

Steel prices are coming back to a level at parity with global prices where margins will become a little bit more livable, top management told analysts during a conference call following the announcements of the results.

“We are seeing the prices increase from January 1 and in some of the products maybe mid-January as well. You will see this probably play out in this quarter which is seasonally a better quarter,” Jayant Acharya, Deputy MD, JSW Steel told analysts.

The domestic price rise is a reflection of global price movement.

“On a dollar basis, China moved up by about $100. European CFR also, we have seen move up in the range of $140-plus. And we are seeing a reflection of that in India. Primarily, the cost increase, some of that had become unsustainable, and therefore, the steel prices are coming back to a level where margins will become a little bit more livable,” he said adding that there is parity between domestic and global prices.

“From an import parity perspective, I think we are by and large similar to the international offers now. International offers have also increased. Therefore, since the international prices have gone up, we do see an opportunity for some increases in the domestic,” he said.

As realisation improves, raw material costs are also coming down which will improve margins in Q4.

“The full benefit of lower prices of consumables, fluxes, and other items have not fully come in Q3. So, those benefits will flow more or fully in Q4,” Seshagiri Rao, Joint MD and Group CFO at JSW Steel, said.

Major costs to stay range bound

“As far as coking coal is concerned, we have been able to get an advantage of $100 in the last quarter. It will be flattish this quarter. We don’t expect too much of movement, it will be range bound. As far as iron ore is concerned, I think we have already seen the prices going up and we expect this also to remain in the range-bound manner in this quarter. It has already moved up in the last few weeks, Jayant Acharya said.

Power costs will remain more or less in the same range as in Q3. In Dolvi, JSW has started a 60 MW power plant, which will bring down power costs marginally.

Posts y-o-y fall in Q3 net profit

JSW Steel has posted 86 percent fall in its December quarter consolidated net profit to `474 crore, down from `4,516 crore in the year-ago period, it said in a regulatory filing.

Saleable steel sales for the quarter stood at 5.63 million tons (mt), higher by 21 percent year-on-year (y-o-y) driven by higher domestic sales, but lower by 2 percent quarter-on-quarter (q-o-q).

The company registered revenue from operations of `39,134 crores and operating EBITDA of `4,547 crores, with an EBITDA margin of 11.6 percent.

“The increase in EBITDA q-o-q is attributable primarily to a reduction in coking coal prices. The decline in sales realisation partly offsets the benefit from lower costs,” the company said in a release.

Production and sales

Crude steel production on a stand-alone basis was 5.32 mt, showing a growth of 7 percent. The steel plants were operated at 92.5 percent capacity utilisation. Bhushan Power and Steel improved its capacity utilisation to 85 percent as against 72 percent in the previous quarter.

On a consolidated basis JSW posted crude steel production, highest ever, of 6.06 mt, showing a growth of 9 percent q-o-q with a capacity utilisation of 91 percent. On the sales side, on a stand-alone company basis, it had 4.95 mt.

On a consolidated basis including Bhushan Power and Steel, it was 5.55 mt.

“We sold 5.163 mt, highest ever domestic sales, showing a growth of 2 percent in volume terms. But the overall volumes are lower because exports have fallen,” Rao said.

Exports have fallen by 32 percent y-o-y basis and as a percentage of sales, touched 7