By Manvi Pant
(Reuters) -India’s JSW Steel reported a bigger-than-expected drop in third-quarter profit on Friday as lower prices and tepid demand continued to hurt the country’s top steelmaker.
Its consolidated net profit plunged 70% year-on-year to 7.17 billion rupees (about $83 million) for the quarter ended Dec. 31.
Analysts, on average, had expected profit to fall 62% to 9.28 billion rupees, as per data complied by LSEG.
Domestic steel mills have grappled with an influx of steel imports from China over the past year, with shipments hitting an all-time high in the April-December period, a 35.4% increase year-on-year.
Chinese steel sells for $25 to $50 per metric ton cheaper than domestic steel and sometimes as much as $70 cheaper, Reuters reported last month.
Moreover, domestic demand also remained muted due to lower construction activity and project delays after government spending cooled off following the national elections last year, according to analysts.
JSW says it expects government spending to recover in the fourth quarter, “culminating in approximately 10% growth for the fiscal year.”
Its sales volumes, however, picked up during the quarter, owing to strong sales in the renewable energy sector and appliances and tinplate businesses.
This resulted in revenue from operations falling only 1.3% to 413.78 billion rupees, which scraped past analysts’ estimate of 408.87 billion rupees.
Its earnings before interest, tax, depreciation and amortisation (EBITDA) fell 22% to 55.79 billion rupees for the quarter, but was above analysts’ expectation of 50.97 billion rupees.
“Higher sales volumes and lower coking coal cost – a key steelmaking raw material – helped arrest the fall in EBITDA,” said Parthiv Jhonsa, lead analyst for metals and mining at borkerage Anand Rathi.
The company is the first in the sector to report its results, with peer Tata Steel set to announce its quarterly earnings next week.
($1 = 86.1990 Indian rupees)
(Reporting by Manvi Pant in Bengaluru; Editing by Sonia Cheema and Janane Venkatraman)
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