JSW Steel, Tata Steel post strong profits in Q4

JSW Steel, the largest steel maker in India, reported a consolidated net profit of Rs 2,879 crore for the quarter ended in March, a 186% rise from Rs 996 crore in the year ago period.

Analysts had been expecting a strong growth in quarterly profit owing to rising steel prices. A Reuters poll had estimated that the profit would rise 90%. According to reports, steel prices have risen around 14% in the past six months.

Total revenue from operations stood at Rs 20,817 crore, 16% higher than Rs 17,917 crore last year. Operating EBITDA too saw a healthy improvement, rising 67% year-on-year to Rs 5,290 crore.

Meanwhile, Tata Steel posted a profit of Rs 10,187 crore on a consolidated basis as against a loss of Rs 725 crore a year ago. This was largely due to a one-time gain of Rs 11,376 crore that came from the restructuring of its UK pension scheme. Revenue was up 6.7% to Rs 36,130 crore year-on-year.

Both steel giants were optimistic about the road ahead, indicating that the higher demand for steel was here to stay, especially on the domestic front.

JSW Steel’s exports declined to 15% of sales from 36% a year ago.The company attributed this to robust domestic demand. “We moderated our exports due to healthy domestic demand. We reoriented supplies to automotive and appliance sectors given the high demand coming from these sectors,” said Seshagiri Rao, joint managing director and group CFO of JSW Steel while addressing the media after the results were announced.

T.V. Narendran, MD and CEO of Tata Steel, said, “The commercial vehicle segment has shown strong growth and the government’s infrastructure push is also a positive for steel demand. We have seen quarter-on-quarter demand increasing by 8-9% versus last year, which is higher than what we’ve seen in a long time.”

“Steel prices went up by around $60 globally since November last year. We expect prices to remain range-bound going forward,” JSW Steel’s Rao said, commenting on the increasing price trend. “Assuming steel prices remain at current levels, there is a scope for EBITDA to improve further as we have identified cost-saving measures in the last financial year that can result in overall savings of Rs 2,000 crore,” he added.

Speaking on the company’s interest in stressed assets, Rao said JSW Steel is in ‘wait-and-watch’ mode. JSW Steel had submitted its resolution plan to the lenders of Monnet Ispat in April and is awaiting the go ahead from the National Company Law Tribunal (NCLT) which had raised questions with respect to loans given by Monnet Ispat to Monnet Power being excluded from the liquidation value. Rao added that it was up to the committee of creditors and the resolution professional to answer the tribunal’s queries.

On Essar Steel, Rao reiterated that JSW Steel had written to the creditors of the debt-laden company and is waiting for a response. Recently, ArcelorMittal parked Rs 7,000 crore to clear dues of its associate companies to make itself eligible to bid for Essar Steel. JSW Steel, in a consortium with Numetal, is a rival bidder in this case. But Rao says any legal recourse to challenge a decision on Essar Steel is not being considered as of now.

Rao added that although there are no big assets available right now on the IBC front, if a second round of bidding opens up for any asset, JSW Steel will evaluate and consider participating.

Tata Steel, which recently emerged as the winner in the race for the stressed Bhushan Steel expressed confidence on completing the deal at the earliest and ramping up the capacity utilization of Bhushan Steel’s assets. “Right now, the asset which has a capacity utilization of 5.1-5.5 million tones is operating at around 3.5 million tones. There is a potential to take it to 8 million tones and higher,” Narendran said.

JSW Steel’s shares closed at Rs 336.65 on the BSE, up nearly 1% from the previous day’s close. Tata steel’s stock closed at Rs 622.05, marginally lower than the previous day’s close. The Sensex closed at 35,387.55, falling 0.44% from the previous day’s close.