JSW Steel expects imports to reverse second-quarter profit in second half

MUMBAI: JSW Steel expects its margins to improve in the second half of FY25 as steel prices recover after hitting multi-year lows in September and the company’s cost-cutting measures will continue to bear fruit, a top executive said.

The steelmaker’s joint managing director Jayant Acharya said in an interview that the additional capacity from the company’s upcoming expansion projects will also help increase sales and expand sales more broadly. Allocate fixed costs on the basis of further increasing profit margins.

JSW Steel expects to add about 6 million tons of new production capacity per year in the second half of this fiscal year, of which 1 ton will be added at the Bhushan Power and Steel plant and 5 tons will be added at the Vijaynagar steel plant in Karnataka. This would bring its total domestic production capacity to just over 34 tonnes per year.

The company also expects to operate four new iron ore mines in the second half of the year. The executive said this will help reduce raw material costs and logistics costs because the mines will be closer to the company’s factories. The new mine will bring the company’s self-sourced iron ore procurement ratio to 41%.

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The steelmaker also expects coking coal costs to fall by $20-25 a ton in the second half on expectations of lower prices and the use of more cost-effective coal blends it has been trialling.

“We remain bullish on the second half,” Acharya said. “Seasonal demand will be stronger in the second half of the year and our new capacity will come into play at the right time. This will allow us to significantly increase our sales volume and absolutely improve our earnings before interest, taxes, depreciation and amortization (Ebitda). “

Ebitda stands for earnings before interest, taxes, depreciation and amortization and is a measure of a company’s profitability.

The steelmaker’s second-quarter Ebitda fell 31% year-on-year to $Steel prices fell to $8,757 per ton in September as competition from cheap imports hit their lowest point in nearly four years. India’s steel imports in the first half of FY25 are expected to be around 5.1 million tonnes, according to market intelligence firm BigMint. A year-on-year increase of 54%.

However, JSW Steel’s second-quarter results were better than Wall Street’s expectations, which had expected even lower Ebitda. Analysts said the company’s cost-saving efforts helped its financial results. Analysts noted that profit margins are expected to improve further in the second half as prices rise.

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“The combination of lower raw material costs, firm steel prices and operating leverage should drive $Kotak institutional equity analysts led by Sumangal Nevatia said steel margins will recover to 2,000-3,000/ton in 2HFY 2025. Analysts expect Ebitda to be $On an annualized basis, it was 10,077-11,703 tons per ton in FY25 and FY26.

Apart from expansions at BPSL and Vijaynagar, the company also plans to increase capacity through some debottlenecking activities and a 5 mtpa expansion at the Dolvi plant to take its total capacity in India to 42 mtpa by the end of FY28. Coupled with strong domestic demand growth, this will lead to a CAGR of 11% from FY24 to FY27, analysts at Kotak said.

However, they lowered the company’s Ebitda forecast for the period by 5-6% due to narrowing domestic profit margins and lower earnings from the company’s international operations.

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