JSW Steel Q2 Results: Largecap Steel Company Reports 85% Decline In Net Profit YoY, Share Price Drops

JSW Steel, India's leading steelmaker, posted a steep 85% year-on-year decline in net profit for the September quarter, with profits falling to Rs 404 crore compared to Rs 2,773 crore in the same period last year. The drop in profit was influenced by a one-time loss of Rs 342 crore tied to the surrender of a mining lease, coupled with an increased tax rate.

The company's revenue from operations stood at Rs 39,684 crore, marking an 11% decline from Rs 44,584 crore in the year-ago quarter, and also lower than its previous quarter's revenue of Rs 42,943 crore. EBITDA also saw a decrease, down to Rs 5,437 crore from Rs 7,886 crore a year earlier, with EBITDA margins slipping to 13.7% from 17.7% in Q2 FY24.

JSW Steel shares traded with a nearly 2% drop, at around Rs 939.80 per share, on the National Stock Exchange as of 2:30 pm on October 25. Despite the recent dip, JSW Steel shares have delivered over 25% returns in the past year and have risen by 7% in 2024.

The company's consolidated crude steel production for the quarter reached 6.77 million tonnes, a 7% rise both year-over-year (YoY) and quarter-over-quarter (QoQ). Steel sales totaled 6.13 million tonnes, showing a 3% decline YoY and remaining relatively stable QoQ. Domestic sales reached a record high of 5.57 million tonnes, with a 1% increase YoY and a 5% increase QoQ.

In contrast, exports saw a sharp drop, down 43% YoY and 34% QoQ to 0.39 million tonnes, largely due to increased Chinese exports impacting global markets. Exports made up 7% of sales from Indian operations in Q2 FY25, compared to 10% in Q1 FY25, as noted in the earnings report.

Indian steelmakers are facing pressure from a surge of low-cost imports, primarily from China, followed by South Korea and Vietnam, which are weighing down local prices. To address this, the steel ministry has endorsed a temporary 'safeguard duty' to counter the impact of Chinese imports, and an investigation is underway to examine the effects of specific products imported from Vietnam on the domestic industry.

On August 3, 2024, the company announced its decision to relinquish the Jajang Iron Ore mine in Odisha's Keonjhar district, citing economic unviability. The Indian Bureau of Mines approved the final mine closure plan on October 9, after which the company submitted its application to surrender the mining block. Consequently, a net provision of Rs 342 crore was recorded for the carrying value of the assets, including inventory and site restoration liability, and was classified as an exceptional item in Q2 FY24.

The company's shares have seen an 8.17% decline this month, marking the steepest monthly drop since April 2022 when the stock fell by 24.19%. Currently, the stock trades at 10% below its recent high of Rs 1,063 per share and is down 11% from that peak. By close, shares had fallen 1.50%, at Rs 943.85.

The September quarter often proves challenging for steelmakers due to reduced construction activities during the monsoon season. However, this year, issues were intensified by an influx of cheaper Chinese steel imports, which have been impacting the domestic steel market.

Looking ahead, steel companies are hopeful for some respite as China's latest economic stimulus measures could curb the country's need to dump excess steel into the global market.