Earnings Analysis: JSW Steel

July 28th, 2011 by admin | Comments Off | ShareThis

In the quarter ended June 2011, JSW Steels consolidated net profit outbeat the market expectation with impressive 64% growth to Rs 485.16 crore on higher steel sales, realizations and impressive non operating performance. The topline grew by robust 53% to Rs 7438.69 crore reflecting the steel sales. Increased raw material costs and power & fuel costs dragged down the operating profit margin (OPM) by 290 bps thus limiting growth in operating profit to 33% to Rs 1434.83 crore. Limited depreciation cost increase, fall in interest cost and effective tax rate boosted the net profit by 64% to Rs 485.16 crore. Consolidated financial results for the quarter ended June 2011 do not include the results of JSW Ispat Steel Limited & its subsidiaries as its financials are not presently available. On standalone basis, the operating income grew by robust 51% to Rs 7069.38 crore on 44% growth in sales volume to 1.714 million tonnes and improved realizations. Unfortunately crash in OPM by 240 bps to 19.7% limited the operating profit growth to 35% to Rs 1393.89 crore. The PBT grew by impressive 63% to Rs 826.27 crore while the net profit rose by 65% to Rs 578.32 crore. Quarter Performance The consolidated operating income grew by robust 53% to Rs 7438.69 crore reflecting steel sales. The steel sales increased by notable 54% to Rs 7583.72 crore. The balance was met by power sales that grew by 66% to Rs 480.93 crore while sales of others grew to Rs 183.32 crore (against Rs 8.85 crore in June 2010 quarter). Increased raw material costs and power & fuel cost pulled down the OPM by 290 bps to 19.3%. The PBIT margin of steel fell by 80 bps to 11% limiting the growth in its PBIT to 44% to Rs 859.63 crore. Also the PBIT margin of power crashed by 2830 bps to 16% resulting in 41% downfall in its PBIT to Rs 75.76 crore. Only PBIT margin of others grew by whopping 2530 bps to 29% thereby boosting its PBIT to Rs 53.48 crore (against Rs 0.34 crore in June 2010 quarter). The consolidated PBT grew by impressive 68% to Rs 749.69 crore on supportive non operating side. The depreciation cost grew by limited 22% to Rs 440.13 crore while the interest cost fell by 3% to Rs 261.99 crore. The other income grew to impressive Rs 16.98 crore as against Rs 0.09 crore in June 2010 quarter. Further fall in effective tax rate by 100 bps boosted the PAT by 70% to Rs 491.52 crore. However the net profit growth was constrained though to impressive 64% to Rs 485.16 crore due to accounting profit on minority interest (against loss in June 2010 quarter). On standalone basis, the operating income grew by robust 51% to Rs 7069.38 crore on 44% growth in sales volume to 1.714 million tonnes and improved realizations. Unfortunately crash in OPM by 240 bps to 19.7% limited the operating profit growth to 35% to Rs 1393.89 crore. The PBT grew by impressive 63% to Rs 826.27 crore while the net profit rose by 65% to Rs 578.32 crore.

Projects: 3.2 MTPA expansion project at Vijayanagar During the quarter, the company has commenced operation of Blast Furnace 4 and Sinter plant 4 as a part of 3.2 MTPA expansion project at Vijayanagar Works on 20th July 2011 and is under trial run. With this all the major facilities under the project have started. Other Projects Pellet plant 2 of 4.2 MTPA at Vijayanagar works has commenced on 15th July 2011 and is under trial run. The implementation of another 300 MW captive power plant, second phase of beneficiation plant and phase II of HSM 2 at Vijayanagar Works and second phase of blooming mill at Salem Works is progressing satisfactorily, to be commissioned in FY 2012. Outlook Global recovery continues to be fragile in the shadow of Eurozone crisis, US unemployment, Japan restructuring and China slowdown, IMF has estimated world GDP growth of 4.3% for FY 2012. Amidst inflation & tightening of monetary policies in emerging markets, commodity prices continue to remain firm. Latest economic data points indicate a slowdown in economic activity mostly attributed to tightening of monetary policy with the objective of continuing surging inflation, however, the structural growth story of India is intact due to expected good monsoon, under robust domestic consumption. Though there is temporary pause in growth momentum, the GDP growth is still expected to be in range of 8% in the current financial year. In spite of steel consumption growth during the current quarter being only 1.5%, it is expected to pickup momentum in the following quarters backed by strong fundamentals. Other Information: During the quarter, the Company has made additional investments aggregating Rs. 237.16 crore in subsidiary, associate and joint venture companies. During the quarter, the Company has acquired 8,99,40,890 equity shares of JSW Ispat Steel Limited (erstwhile Ispat Industries Limited ) pursuant to the mandatory open offer in terms of SEBI (SAST) Regulations, 1997 at an aggregate value of Rs 200.12 crore. Paid up equity share capital does not include an amount of Rs 61.03 crore being the amount originally paid up on the shares forfeited in an earlier year. The promoters share in the total shareholding stands at 37.71% as on 30th June 2011. The promoters have pledged 10.62% of total shares of the company.

Currently the scrip is trading at Rs 863.25 on BSE. JSW Steel: Consolidated Results Particulars 1106 (3) 7438.69 19.3 1434.83 16.98 1451.81 261.99 1189.82 440.13 749.69 0.00 749.69 258.17 1006 (3) 4858.00 22.2 1078.40 0.09 1078.49 269.99 808.50 361.22 447.28 0.00 447.28 158.66 Var (%) 53 1103 (12) 24116.09 20.2 4878.59 68.18 4946.77 945.41 4001.36 1559.71 2441.65 0.00 2441.65 782.27 1003 (12) 19073.77 22.0 4187.27 415.56 4602.83 1104.17 3498.66 1298.66 2200.00 0.00 2200.00 646.71 Var (%) 26 17 -84 7 -14 14 20 11 0 11 21

Total Operating Income OPM (%) OP 33 Other Income 999 PBDIT 35 Interest -3 PBDT 47 Depreciation / Amortization 22 PBT Before EO 68 EO 0 PBT 68 Tax^ 63 PAT Before Share of Associates and 491.52 288.62 70 Minority Interest Share of Profit/Loss of minority 9.81 -3.39 LP Share of Profit of Associates (net) 3.45 3.36 3 Net profit 485.16 295.37 64 EPS * 85.7 51.7 * Annualized on current equity of Rs 223.12 crore. Face Value: Rs 10 ^ Tax includes provision for Income tax and fringe benefit tax Var. (%) exceeding 999 has been truncated to 999 LP: Loss to Profit PL: Profit to Loss EO: Extraordinary items EPS is calculated after excluding EO and relevant tax Figures in Rs crore Source: Capitaline Corporate Database JSW Steel: Consolidated Segment Results Particulars Segment Revenue Steel 1106 (3) 1006 (3)

1659.38 1553.29 7 -23.87 70.73 1753.98 77.4 -33.21 -28 11.05 540 1597.55 10 70.4

(%) of Var 1103 Total (%) (12) 54

1003 (12)

(%) of Var Total (%) 27

7583.72 4931.00 92

24630.84 19439.97 96

Power Others Total Sales Add: Unallocated corporate income Less : Inter-Segment Revenue Net Sales Segment Results PBIT Steel Power Others Total Segment Results Less: Interest Expense (net) Other Unallocable Income net off Unallocable (Expenditure) PBT Capital Employed (Segment Assets less Segment Liabilities) Steel Power Others Unallocated

480.93 289.75 6 183.32 8.85 2 8247.97 5229.60 100 0.00 809.28 0.00 371.60

66 1094.07 968.18 4 999 54.40 25.02 0 58 25779.31 20433.17 100 0 0.00 0.00

13 117 26 0 22 26

118 1663.22 1359.40 53 24116.09 19073.77

7438.69 4858.00

859.63 75.76 53.48 988.87 261.99 16.45 743.33

596.09 127.50 0.34 723.93 269.99 0.09 454.03

87 8 5 100

44 -41 999 37 0 -3

3211.99 344.26 -80.47 3475.78 945.41

2957.58 389.84 0.98 3348.40 1104.17 0.03

92 10 -2 100

9 -12 PL 4 -14 999 13

999 5.88 64

2536.25 2244.26

28289.53 1981.00 803.79 13821.48

25216.55 1328.84 771.79 17035.25

164 11 5 -80

12 49 4 -19 68

26755.39 1811.47 900.03 12701.73

23945.58 1217.02 501.66 16188.46

160 11 5 -76

12 49 79 -22 77

Aggregate for the 17252.84 10281.93 100 company Var. (%) exceeding 999 has been truncated to 999 LP: Loss to Profit PL: Profit to Loss EO: Extraordinary items Figures in Rs crore Source: Capitaline Corporate Database Powered by Capital Market Live News Tags: Indian steel i

16765.16 9475.80 100