JSW Steel Q3: Low steel prices, imports weigh heavy despite cost improvements; results beat Street expectations

JSW Steel Q3 FY25 Results

JSW Group flagship JSW Steel Ltd's consolidated net profit for the October-December quarter plunged 71 percent year-on-year to Rs 719 crore, as steel prices continued their downward curve, owing to the continued debilitating effect of Chinese steel imports, even as volumes showed strength both on an annual and sequential basis. The company's management said in a post-earnings call that sales velocity to most sectors had been encouraging during the quarter.

The profit estimates were higher than what analysts had expected. According to a Moneycontrol poll, the Street had estimated an even sharper drop in net profit to Rs 639 crore. The decline in prices also affected the company's margins, with consolidated operating EBITDA margins at 13.5 percent, compared to around 17.1 percent in the year prior.

Despite earlier indications of softness in steel demand owing to back-ended capital expenditure by the Union and state governments, JSW Steel reported steel sales of 6.71 million tonne for the quarter-ended December 31, higher than the 6 million tonne reported for the same quarter last year. The steel sales figures were higher even on a sequential basis. This meant that the consolidated topline declined by just over 1 percent on an annual basis to Rs 41,378 crore, broadly in line with analysts' expectations.

JSW Steel's joint managing director and chief executive officer Jayant Acharya told investors in the post-earnings call that the company's capacity utilisation remained high at 91 percent for Q3, with increased institutional sales, and higher supplies year-on-year to sectors such as automobiles and appliances. Sales of long products, important due to its use in real estate and infrastructure projects, increased by 26 percent year-on-year, which was reflected in fairly stable prices for the quarter, even as flat product prices struggled.

Despite positive developments on the demand front, Acharya noted that steel imports continued at an elevated level, with India remaining a net importer of steel for the nine months of the ongoing financial year, noting that the imports have continued despite stimulus measures in China, the largest steel exporter to India. He added that the firm, as well as the rest of the industry, is looking forward to trade actions, including the possible imposition of duties or tariffs on imported steel, after the ongoing investigation by the union Directorate General for Trade Remedies.

With cash flows affected by price-related difficulties, JSW Steel has already cut its FY25 capital expenditure target to around Rs 16,000 crore, from the earlier Rs 20,000 crore. Acharya added that while the company may consider holding back some more capital expenditure in order to preserve cash, it will continue to spend on value-accretive projects, as well as those that increase efficiency.

Acharya added that the next stage of capital expenditure will include the next stage of expansion at its Dolvi steel works in Raigad, Maharashtra, as well as onstreaming a number of iron ore mines in Karnataka, Odisha, and Goa, as well as other associated infrastructure. He said that the company will continue to look out for iron ore or coking coal assets in India and overseas for the purposes of backward integration.

On January 24, JSW Steel's stock closed 0.2 percent higher on the National Stock Exchange at Rs 931.95.