JSW Steel has reported a 29 per cent fall in the December quarter net profit at ₹329 crore, against ₹466 crore in the same period last year, due to the sharp drop in prices and dip in demand.
Net sales were down three per cent to ₹12,927 crore (₹13,383 crore). In last four months, steel prices internationally have plunged by $70 (₹4,340) a tonne; the impact on Indian markets is expected to continue in the March quarter as well.
The company could not maintain its profitability despite the contribution of value-added products to overall sales touching 35 per cent against 25 per cent last year. Overall expenses was down marginally by two per cent to ₹11,817 crore (₹12,019 crore). Earnings before interest, tax, depreciation and amortisation were down nine per cent in the December quarter at ₹7,000 a tonne (₹7,700 a tonne).
Seshagiri Rao, Joint Managing Director, JSW Steel, said the Indian steel industry is passing through difficult times with structural overcapacity, surging imports, falling prices and lower demand, besides currency volatility and steep depreciation posing additional challenges.
JSW Steel flat product production was down four per cent at 2.44 million tonnes (mt) while steel sales were lower by two per cent at 3.03 mt. In the first nine months of this fiscal it produced 9.57 mt and sold 8.97 mt. The company expects to finish the fiscal closer to its annual target of 12.9 mt of production and 12.4 mt of sales.
On rising imports, Rao said shipments from China have increased seven times, with overall imports more than doubling to one mt in December. The company increased capacity utilisation at the 10-million-tonne-a-year Vijayanagar unit to optimal levels by importing two mt of iron ore.
It expects the Karnataka Government to auction seven mines in the next three months, which should improve supply of iron ore by four mt next fiscal.
Blaming NMDC’s divergent pricing strategy for the industry’s ills, Rao said that internationally, iron ore prices have dipped 50 per cent over the last year, while NMDC had raised process 14 per cent, taking advantage of the short supply in the market.