JSW Steel's consolidated revenue from operations increased by 11 % YoY to Rs 20318 crore for the quarter. Operating EBITDA increased by 17% YoY to Rs 4501 crore, implying a margin of 22.2%. The Net Profit after Tax for the quarter declined by 10% YoY to Rs 1603 crore, after incorporating the financials of subsidiaries, joint ventures and associates.

The company's standalone revenue from operations increased by 9% YoY to Rs 18393 crore, during the quarter, primarily driven by higher steel prices and better product mix. Despite an increase in costs of key inputs like iron ore, coal, energy prices, and other consumables, operating EBITDA for the quarter surged by 24% YoY to Rs 4438 crore and EBITDA margin stood at 24.1 %. The net profit after tax increased by 68% YoY to Rs 1892 crore.

Consolidated saleable steel sales declined by 10% YoY to 3.62 million tonne during the quarter. Sales of value added and special products (VASP) accounted for 54% of total sales volumes.

Standalone Crude Steel production during the quarter increased by 3% YoY to 4.23 million tonne aided by higher capacity utilization at both Vijayanagar and Dolvi works. With 9MFY2019 production at 74.7% of FY2019 guidance, the company is on track to achieve the crude steel production guidance of 16.75 MTPA for FY2019.

Consolidated Net gearing (Net Debt to Equity) stood at 1.40x at the end of the quarter (as against 1.46x at the end of Q2 FY2019) and Net Debt to EBITDA of 2.32x (as against 2.35x at the end of Q2 FY2019).

Consolidated Quarterly Performance

The consolidated net sales increased by 11% to Rs 20318 crore for the quarter ended December 2018 compared to corresponding previous year period. The OPM increased 110 bps to 22.2%. Thus the operating profit rose by 17% to Rs 4501 crore.

Cost of material consumed as a percentage of adjusted net sales fell by 130 bps to 52.9%. Employee benefit expenses rose 50 bps to 3%. Power and fuel expenses rose 60 bps to 8.7%. Other expenses were up 40 bps at 14.1%.

Other income fell 12% to Rs 37 crore in Q3FY'19 compared to Rs 42 crore in Q3FY'18 while interest cost was up 11% to Rs 1021 crore. Depreciation increased 27% to Rs 1078 crore. PBT before EO was up 15% to Rs 2439 crore.

The company reported nil EO items during the quarter compared to EO expense of Rs 264 crore in Q3FY18 for impairment towards Goodwill, Mining Development and advances relating to surrender of one of its iron ore mine in Chile. PBT after EO was up 32% to Rs 2439 crore.

Net tax provisions stood at Rs 820 crore compared tax expense of Rs 94 crore in the corresponding previous year period.PAT reported was down 8% to 1619 crore. Considering minority shares and profit of associates and JVs Net profit was down 7% to Rs 1624 crore.

Consolidated nine months ended Performance

The consolidated net sales increased by 23% to Rs 62389 crore for year ended December 2018 compared to corresponding previous year period. The OPM increased 450 bps to 23.3%. Thus the operating profit rose by 53% to Rs 14512 crore.

Cost of material consumed as a percentage of adjusted net sales fell 400 bps to 51.6%. Employee benefit expenses increased 10 bps to 2.8%. Power and fuel expenses rose 10 bps to 8.4%. Other expenses was flat at 14.5%.

Other income rose 24% to Rs 151 crore in 9MFY'19 compared to Rs 122 crore in 9MFY'18 while interest cost was up 2% to Rs 2871 crore. Depreciation increased 17% to Rs 2957 crore. PBT was up 106% to Rs 8835 crore.

The company reported nil EO items during the period compared to EO expense of Rs 264 crore in 9MFY18 for impairment towards Goodwill, Mining Development and advances relating to surrender of one of its iron ore mine in Chile. PBT after EO was up 120% to Rs 8835 crore.

Net tax provisions stood at Rs 2809 crore compared tax expense of Rs 823 crore in the corresponding previous year period.PAT reported was up 88% to 6026 crore. Considering minority shares and profit of associates and JVs Net profit was up 90% to Rs 6116 crore.

Subsidiaries performance:

JSW Steel Coated Products: During the quarter, JSW Steel Coated Products registered a production volume (Galvanised/Galvalume products) of 0.42 million tonne and sales volume of 0.42 million tonne. Revenue from operations and Operating EBITDA for the quarter stood at Rs 2964 crores and Rs 97 crore respectively. It reported a Net Profit after Tax of Rs 18 crore for the quarter.

US Plate and Pipe Mill: The US based Plate and Pipe Mill facility produced 91183 net tonne of Plates and 16367 net tonne of Pipes, reporting a capacity utilization of 38% and 12%, respectively, during the quarter. Sales volumes for the quarter stood at 69634 net tonne of Plates and 16737 net tonne of Pipes. It reported an EBITDA of US $4.06 million for the quarter.

JSW Steel USA Ohio Inc (Acero): The US based HR coil manufacturing facility produced 55438 net tonne of HRC during the quarter. Sales volumes for the quarter stood at 47339 net tonne. It reported an EBITDA loss of $10.55 million for the quarter.

JSW Steel (Italy) S.r.1. (Aferpi): The Italy based Rolled long products manufacturing facility produced 68036 tonne of and sold 45948 tonne during the quarter. It reported an EBITDA loss of 7.36 million Euros for the quarter.

Projects and Capex update:

The following projects were completed in Q3 FY2019

• Battery A (0.75 MTPA) of Coke oven plant at Dolvi commenced commercial production from pt November 2018 and Battery B (0.75 MTPA) is currently under trial run.

• Tin Plate line with a capacity of 0.25 MTPA at Tarapur is completed and under trial run.

• Pipe conveyor project at Vijayanagar for iron ore transportation - initial phases are under trial run.

All the other key projects viz. augmenting crude steel capacity at Dolvi works from 5 MTPA to 10 MTPA, revamping and capacity up-gradation of BF-3 & capacity expansion of CRM-1 complex at Vijayanagar works, modernization-cum-capacity enhancement at downstream facilities of JSW Steel Coated Products and strategic cost savings projects are progressing satisfactorily for commissioning as per schedule.

The project to augment Dolvi capacity from 10 to 10.66 MTPA entailing increase in DRI capacity at Salav and modification of SMS at Dolvi for Hot Charging of ORI is currently under review pending receipt of requisite environmental clearances.

Outlook as per company

The International Monetary Fund (IMF) has revised CY 2019 global growth forecast to 3.5% (from 3.7%). The US growth remains underpinned by tight labour markets, fiscal impulse and Federal Reserve's accommodative stance. The Euro area growth outlook has softened on back of weak industrial growth and soft private consumption. Japan's growth outlook remains firm aided by fiscal support expectations. Chinese growth has moderated, but calibrated fiscal and monetary policy measures are underway. However, escalating trade measures and political uncertainty pose risks to the global growth outlook.

Global Steel prices softened during the quarter driven by weaker demand and destocking. Chinese steel production and exports moderated during the quarter.

India continues to remain a bright spot and in CY2018 emerged as the second largest producer of steel globally, the third largest consumer globally, and had the distinction of witnessing the highest growth rate in steel consumption among major steel consuming markets. This, admittedly, has also made India a magnet to attract higher imports from steel surplus economies, especially from countries like Japan and South Korea who enjoy a Free Trade Agreement.

India's Q3 FY2019 crude steel production grew by 1.5% YoY, while the apparent finished steel consumption grew by 8.1%. Imports during this period surged by 7.9% YoY and exports declined by 39.5% YoY.

In India, a strong momentum in government spending on infrastructure is driving an increase in Gross Fixed Capital Formation (GFCF). Additional budgetary allocation in the Interim Budget 2019 towards infrastructure, railways and defense are key positives.

Additionally, a Fiscal stimulus of INR ?1 trillion in the Interim Budget via Direct Income Support scheme, pension benefits and tax rebates are expected to spur rural spending and aid overall consumer demand.

Tailwinds of recent decline in crude oil prices in late 2018, moderating inflation and easing liquidity are clearly visible. However, escalating international trade tensions are headwinds to exports.

The scrip is currently trading at Rs 274

JSW Steel: Consolidated Results