Lower price realisation dented net profits of India's leading steelmaker JSW Steel by 88 percent in the third quarter, but top executives of the company held out hope for a better fourth quarter.
JSW Steel had a net profit of Rs 187 crore in the October to December quarter, as compared to Rs 1,603 crore in the same quarter a year earlier. It also mattered that its overseas operations, in the US and Italy, recorded losses in the three months.
The company's total revenue dropped by over 10 percent to Rs 18,182 crore.
"The net sales realisation was down by 23 percent, compared to a year ago, in the quarter. On the other hand, though the costs were also down - by 15 percent year-on-year- the difference between the two had an impact on the numbers," said Jt Managing Director and Group CFO Seshagiri Rao during a conference on January 24.
The company also reported a loss of Rs 300 crore in its inventory.
Extended monsoon during the quarter impacted the company's projects, which have been delayed by three to six months. These projects include the expansion of the Dolvi unit, which was earlier slated to be completed by March 2020. Now this has been shifted to the first half of the 2021 financial year.
JSW Steel though will look forward to a better end to the financial year.
It is mainly backed by an increase in steel prices. "There has been an improvement of Rs 2,500 to Rs 3,000 per ton of steel in this quarter," said Jayant Acharya, Director, Marketing.
"The net sales realisation will go up, and the fourth quarter will be better than the third," added Rao.
The top executives pointed out that demand has picked up from clients in auto and infrastructure space. The trend is visible in the third quarter, with demand from OEMs going up by 21 percent quarter on quarter. Retail sales, was up by 33 percent quarter on quarter, added Acharya.
Rao said that the company will meet its annual guidance for production and sales. The steelmaker expects to end the financial year with a production of 16.5 million tons, and sales of 15.5 million tons.
To achieve that, added Rao, the company will need to have production of 4.5 million tons and sales of 4.25 million in the fourth quarter. "We are confident of doing that," he said.
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