JSW Steel may post 45% sequential drop in Q3 net on lower volume, higher costs

JSW Steel Ltd is expected to report a 45 percent quarter-on-quarter decline in net profit for the December 2023 quarter because of reduced volume and increased operating costs.

The company is expected to report a net profit of Rs 3,556 crore for the third quarter of FY24. A year-on-year comparison of the bottomline is not applicable because it had reported a loss in the same quarter last year. Its net sales is projected at Rs 44,799.60 crore, down 18 percent QoQ and 13 percent YoY, according to estimates from seven analysts.

Standalone volumes are likely to decline 6 percent primarily on account of a seasonally weak quarter. Blended realisations may rise 1 percent sequentially due to higher steel prices in the domestic market. However, with increased coking coal and iron ore prices, standalone EBITDA per tonne is likely to decrease by 14 percent QoQ to Rs 11,000 per tonne in 3QFY24.

Analysts also anticipate international operations to post an EBITDA loss during the quarter on the back of a sharp decline in global steel spreads.

Yes Securities anticipates a Q3FY24 performance similar to Q2FY24 for JSW Steel. The coking coal impact is estimated to be around $30 per tonne for JSW Steel’s Indian operations. Moreover, the expectation is for the topline growth to remain relatively flat.

ICICI Securities anticipates a 5 percent QoQ increase in India business volume, with improved margins due to positive price-cost effects. However, subsidiary performance is expected to remain subdued. Coated products may be affected by a lower CRC-HRC spread, and US subsidiaries could incur inventory-related losses amid falling HRC prices.

According to analysts, the Chinese property market struggles to recover despite government stimulus, while robust demand persists in the automotive sector. Overall, subdued demand in China and increased exports at competitive prices continue to impact domestic realisations. Monitoring the resurgence of Chinese demand and the resumption of Indian exports are key considerations moving forward.

Recently, JSW Steel reported consolidated crude steel production of 6.87 million tonnes for Q3 FY24, marking an 8 percent increase over the previous quarter and a 12 percent rise on-year. The surge in infrastructure projects drove metal demand. Indian operations operated at 94 percent capacity in Q3. In India, crude steel production rose by 9 percent YoY to 6.63 million tonnes. For the US-Ohio operations, there was a 191 percent YoY increase to 0.24 million tonnes, with a sequential rise of 76 percent compared to Q2 FY24. The growth aligns with Crisil’s projection of 11-13 percent YoY growth for India’s steel sector in the current fiscal year.

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