JSPL beats first quarter expectations despite odds

On 9 July, JSPL’s reported net profit fell 23% to ₹1,929 crore, beating consensus analysts’ estimates of ₹991 crore, as indicated by Bloomberg.

The company’s sales volume, both in the domestic and export markets, remained impacted by the challenging market conditions and the imposition of tax to discourage steel exports in May. JSPL’s sales volume fell 16% sequentially to 1.74 million tonnes (mt) during the June quarter but rose 8% from a year earlier because of a low base. Exports contributed to 26% of sales in the June quarter.

However, better price realizations in the domestic market helped. Steel prices in the country rose significantly in March following the Russia-Ukraine crisis and remained elevated till 22 May, whereafter they started declining because of the imposition of the export tax. As a result, price realization rose by ₹7,300 per tonne sequentially, according to analysts, which they attributed to prior-booked higher-priced exports for products such as wire rods and beams.

The company’s management said the realizations rose about 12% sequentially though costs also increased by 10%.

Adjusted operating profit rose 3% to ₹2,993 crore from the preceding three months but declined 32% from a year earlier. The company attributed this to a rise in input costs. It also benefited from low-cost iron ore inventory at Sarda Mines. However, rising coal costs continued to hurt.

The company has won coal blocks in auctions but supplies from these blocks will take time to accrue. The impact of higher input costs will continue to hurt in the second quarter, though the decline in coal and iron-ore prices will start accruing benefits from the December quarter.

However, concerns remain about steel prices, which have fallen by almost 15% since the implementation of the export duty order. The impact of rains on construction during the monsoon will also keep steel prices under pressure.

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