JSW Steel’s Q2FY17 Performance Analysis

JSW Steel’s quarter results are out and we have analyzed the performance of the company based on four parameters which are as follows:

 Sales:
JSW Steel’s sales volume have registered an increase of 15% in Q2 FY17 at 3.8 MnT against 3.3 MnT in Q1 FY17. Whereas, in H1 FY17, company’s sales volume have registered an increase of 14% against previous year’s H1 FY16. As in the first quarter, the company has mentioned its sales target of about 15 MnT for FY17, its H1 sales numbers indicate that it would be able to achieve its fixed target for current financial year.

 Raw Material Cost:
In Q2 FY17, imported coking coal price have increased drastically by about USD 100/MT against previous quarter which was also accompanied by increase in domestic iron ore prices. This impacted the company’s profit margins during the second quarter.

The use of coking coal in steel manufacturing involves 35-40% use of PCI or soft cokin coal and 60-65% use of hard coking coal.

Now, given the increasing price of hard coking coal in global market, JSW Steel plans to bring down the use of hard coking coal to 50-55% from current mix of 60-66% which will help it to deal with increasing raw material prices. The company currently has coking coal inventory of 45-60 days and the impact of higher coking coal cost will be majorly seen in the month of Dec’16.

In case of iron ore, company is not expecting any cost savings from its mines in Karnataka. The company will be able to meet about 15-20% of its iron ore requirement from recently owned Karnataka mines. Rest of its iron ore requirement is met from Odisha, NMDC and Jharkhand.

Prices:
JSW’s steel prices have observed a fall of 3-4% in Q2 FY17 against previous quarter. The actual price hikes post anti-dumping duty announcement were applicable from Sep’16 and thus, its impact will be seen in Q3 FY17 (Oct to Dec). Also the company has announced hike of INR 1,500/MT in Oct’16 and further price hikes are expected in November month also which will improve its numbers in Q3 of FY17.

Profits:
The company’s EBDITA (Earnings Before Depreciation, Interest and Tax) per tonne have registered a fall of 24% in Q2 FY17 at INR 7,077/MT against Q1 FY17 at 9,276/MT. This decline in EBDITA numbers was majorly because of increase in raw material costs during Q2 FY17

JSW Steel Performance Analysis

Source–SteelMint Research