jsw ventues sebi nod investing
JSW Steel posted a net profit of Rs. 1,109 crore for Q1. Pictured: The logo of JSW Group is seen on the company's headquarters in Mumbai, India, February 11, 2016 (Representational image).Reuters file

JSW Steel posted an exponential growth in consolidated net profit to Rs. 1,109 crore for the first quarter (Q1) ended June aided by cost reduction and higher volume sales. The rise in the Sajjan Jindal-owned company's net profit marks a 52-fold increase from Rs. 21 crore in the year-ago period. 

Costs fell 11.26 percent to Rs. 10,447 crore in Q1 from Rs. 11,773 crore in the June 2015 quarter, the company said in a statement on Wednesday. Revenue from operations rose marginally to Rs. 12,720 crore from Rs. 12,447 crore during the corresponding period last year. In volume terms, the company sold 3.34 million tonnes steel, 8 percent more from 3.11 million tonnes in the first quarter ended June 2015. 

"The blast furnace at Dolvi and Vijayanagar, which were re-commissioned in the fourth quarter of fiscal 2016 after capacity expansion, achieved commercial operations with effect from May 1, 2016. The installed capacity of the company has increased from 14.3 million tonnes per annum (MTPA) to 18 mtpa," JSW Steel said in its regulatory filing to the Bombay Stock Exchange (BSE).

Bleak global outlook

The company said globally, the steel sector continues to face the twin challenges of excess capacity and lower demand.

"Global steel capacity utilization in June 2016 jumped to 71.8%. With surge in production not being supported by underlying demand, prices started declining May onwards, but of late they have firmed up again mainly on restocking demand led by infrastructure and construction sectors in China.

"However the global steel industry continues to face headwinds of weak demand and overcapacity. Exports from steel-surplus countries (like China, Korea and Japan) continue to increase. In the absence of effective tariff measures, South East Asia, Middle East, Africa and Europe continue to see surge in imports whereas the US is able to clampdown imports with imposition of trade remedial measures."

Similar trends in India

"In India also, steel production ramp-up was ahead of expected demand pick-up – crude steel production increased by 4.8%YoY in 1QFY17 whereas apparent finished steel consumption grew by only 0.4% due to sluggish demand conditions. At the same time, steel imports remained at elevated levels."

Cheap imports cause for concern

"More than 50% of current imports are happening at prices below MIP levels for the respective product category. Therefore, widening of MIP scope, effective implementation, monitoring and extension of MIP provisions is imperative for the health of the steel industry."

Fund-raising plans

Last week, JSW Steel said it was planning to raise about Rs. 5,032 crore ($750 million) from global investors. According to media reports published last month, JSW had was planning to participate in the upcoming auction of iron ore mines in Karnataka and other states in order to ensure access to raw materials.

Besides, the steel-maker had said it would approach shareholders to raise $2 billion from global markets to drive its long-term capital expenditure and loan refinancing initiatives.

Stock price

The JSW Steel stock was trading at began trading at Rs. 1, 723 at around 9:20 am on Thursday, down 0.87 percent from its previous close on the BSE.