'Turnaround of overseas ops helped JSW Steel post strong Q1 numbers'

NEW DELHI: Better exports realisation, turnaround of overseas operations and strong contributions from two new acquisitions helped JSW Steel post strong numbers in the first quarter of the current financial year, the company’s joint managing director and group CFO MVS Seshagiri Rao told the New Indian Express.

Despite a challenging first quarter, the country’s largest steel manufacturer produced 4.1 million tonne steel during the quarter, which was only 2% lower than the previous quarter. Though sales volume at 3.475 million tonne was lower by 13% during the quarter.

“We usually sell 3.8-4 million tonne in the first quarter,” says Sheshgiri Rao. The company reported total consolidated income of Rs 29,100 crore in the first quarter of 2021-22, showing a 144% jump year-on-year, largely due to higher steel prices. It registered highest ever quarterly revenue from operations of Rs 28,902 crores and highest ever operating EBITDA of Rs 10,274 crores, with an EBITDA margin of 35.5%.

“Despite challenges, what has contributed to good operating profit is turnaround of our overseas operations in the last quarter. In the previous quarter our overseas operations reported a loss of Rs 322 crore, but this quarter they reported a profit of Rs 282 crore. So almost Rs 600 crore has been contributed by our overseas entity to the overall profitability,” said the joint MD. Indian subsidiary also posted strong numbers as EBITDA went up to Rs 1,145 crore in the April-June quarter against Rs 821 crore in the previous quarter.

Its two acquisitions — Bhushan Power and Steel and Monnet Ispat — also did well during the quarter and contributed to Rs 323 crore to JSW Steel’s bottom line. Bhushan Power and Steel and Monnet Ispat were acquired by JSW Steel through insolvency and bankruptcy process. Rao said that exports realisation was strong during the quarter helped by high steel prices as exports accounted for 35% of the sales in the first quarter compared to 25% in the previous quarter.

On sustainability of current steel prices, which have increased anywhere between 30-75% across different global markets, Rao said that commodity prices especially steel would be supported in the long-term by investment in energy transition (from non-renewable to renewable) by big corporation to adhere to their ESG goals and huge spending by governments across the world in under-invested infrastructure set up.

He says that the capital expenditure required for energy transition goals is $2 trillion per annum till 2050.
According to Rao, while the last commodity cycle was mostly driven by oil and gold prices, this time around metals, especially steel, will do well. In the last one and a half years, iron ore and coking coal have not moved the way steel prices have moved.

High prices help exports
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According to Joint MD & Group CFO MVS Seshagiri Rao, exports realisation was strong due to high steel prices as exports accounted for 35% of the sales in the first quarter compared to 25% in the previous quarter