JSW Steel Q2FY25 net profit drops 85% YoY to Rs 404 cr on cheap steel imports

The company had recorded a net profit of Rs 2,773 crore in the same quarter last year.

The steep drop in profit was also attributed to an exceptional charge related to the surrender of an iron ore mine in Keonjhar, Odisha, reported Moneycontrol.

JSW Steel made a provision of Rs 342 crore for the Jajang iron ore mine surrender process, to account for liabilities related to inventory and site restoration, the report said.

Typically, steelmakers face challenges in the September quarter due to monsoon disruptions in construction.

This year, the situation worsened with an influx of lower-cost Chinese steel imports.

JSW Steel’s revenue from operations declined 11% to Rs 39,684 crore in Q2 FY25, down from Rs 44,584 crore in Q2 FY24, primarily due to a sharp fall in steel realisations.

The company’s EBITDA for the quarter was Rs 5,437 crore, showing a slight sequential dip as some import pressures were offset by favorable input costs. The EBITDA margin stood at 13.7%, down from 17.7% in the same quarter last year, though it improved over the 12.8% margin recorded in Q1 FY25.

Steel sales volume for the quarter was 6.13 million tonnes, representing a 3% year-on-year drop and remaining nearly flat compared to the previous quarter.

Domestic sales reached 5.57 million tonnes, marking the highest level for any quarter, though retail sales declined 14% year-on-year due to pressure from cheaper imports.

Institutional sales, however, grew 12% over the same period last year.

For the quarter, JSW Steel’s capital expenditure (capex) amounted to Rs 3,384 crore, taking total capex for the first half of FY25 to Rs 7,850 crore.

The company has also commissioned key infrastructure for its 5 million tonnes per annum (MTPA) expansion at the Vijayanagar facility in Karnataka, with the expanded blast furnace and hot strip mill expected to be operational in the January-March quarter.

JSW Steel is targeting a steel production capacity of 50 MTPA through a planned capex of around Rs 1 lakh crore.

However, the FY25 capex projection has been reduced to Rs 16,000-17,000 crore, down from the initial Rs 20,000 crore estimate.

This adjustment follows the transfer of a slurry pipeline project to JSW Infrastructure, as well as the deferral of a shutdown and capacity expansion for the Vijayanagar BF-3 blast furnace to the first half of FY26.

Due to ongoing expansion projects and a stake acquisition in an Australian coal mine, JSW Steel’s net debt rose to Rs 85,098 crore as of September 30.

The results come amid a 39% correction in domestic hot-rolled coil (HRC) prices in India since their April 2022 peak, noted brokerage firm Nomura on October 2, Moneycontrol reported.

Although domestic steel demand remains strong, driven by the automotive and construction sectors, analysts from Nomura suggest that weaker price realisations may continue to compress margins for leading steel producers. Steel firms are looking to China’s recent economic stimulus measures for relief from import pressures.

Last week, in anticipation of demand growth from infrastructure and real estate, JSW Steel raised prices for long products by Rs 1,000 per tonne, the report said.

Investors and analysts are, however, divided on the likely impact of the Chinese stimulus on local demand, given the absence of structural reforms in China’s struggling real estate sector, the report added.

This uncertainty may sustain pressure from imports, keeping steel prices rangebound in the near to medium term despite attempts to boost prices.

On October 25, JSW Steel’s shares closed 0.8% lower at Rs 950.20 apiece on the National Stock Exchange.