Earnings Analysis

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Earnings Analysis: JSW Steel

July 28th, 2011 byadmin| 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, realizationsand 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 theoperating 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 inOPM 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 PBITmargin 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 0.09crore 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 inOPM 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.

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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 20

th

July 2011 and is undertrial 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 FY2012. 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 stillexpected 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 ofSEBI (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 amountoriginally 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.

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Currently the scrip is trading at Rs 863.25 on BSE.

JSW Steel: Consolidated Results

Particulars1106

(3)

1006

(3)

Var

(%)

1103

(12)

1003

(12)

Var

(%)Total Operating Income 7438.69 4858.00 53 24116.09 19073.77 26

OPM (%) 19.3 22.2 20.2 22.0

OP 1434.83 1078.40 33 4878.59 4187.27 17

Other Income 16.98 0.09 999 68.18 415.56 -84

PBDIT 1451.81 1078.49 35 4946.77 4602.83 7

Interest 261.99 269.99 -3 945.41 1104.17 -14

PBDT 1189.82 808.50 47 4001.36 3498.66 14

Depreciation / Amortization 440.13 361.22 22 1559.71 1298.66 20

PBT Before EO 749.69 447.28 68 2441.65 2200.00 11EO 0.00 0.00 0 0.00 0.00 0

PBT 749.69 447.28 68 2441.65 2200.00 11

Tax^ 258.17 158.66 63 782.27 646.71 21

PAT Before Share of Associates andMinority Interest

491.52 288.62 70 1659.38 1553.29 7

Share of Profit/Loss of minority 9.81 -3.39 LP -23.87 -33.21 -28

Share of Profit of Associates (net) 3.45 3.36 3 70.73 11.05 540

Net profit 485.16 295.37 64 1753.98 1597.55 10

EPS * 85.7 51.7 77.4 70.4

* 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 999LP: Loss to Profit

PL: Profit to Loss

EO: Extraordinary itemsEPS is calculated after excluding EO and relevant tax

Figures in Rs crore

Source: Capitaline Corporate Database

JSW Steel: Consolidated Segment Results

Particulars 1106 (3) 1006 (3)(%) of

TotalVar

(%)1103

(12)1003

(12)(%) of

TotalVar

(%)

Segment Revenue

Steel 7583.72 4931.00 92 54 24630.84 19439.97 96 27

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Power 480.93 289.75 6 66 1094.07 968.18 4 13

Others 183.32 8.85 2 999 54.40 25.02 0 117

Total Sales 8247.97 5229.60 100 58 25779.31 20433.17 100 26

Add: Unallocated

corporate income0.00 0.00 0 0.00 0.00 0

Less : Inter-SegmentRevenue

809.28 371.60 118 1663.22 1359.40 22

Net Sales 7438.69 4858.00 53 24116.09 19073.77 26

Segment Results

PBIT

Steel 859.63 596.09 87 44 3211.99 2957.58 92 9

Power 75.76 127.50 8 -41 344.26 389.84 10 -12

Others 53.48 0.34 5 999 -80.47 0.98 -2 PL

Total Segment Results 988.87 723.93 100 37 3475.78 3348.40 100 4

Less: 0

Interest Expense (net) 261.99 269.99 -3 945.41 1104.17 -14

Other Unallocable Incomenet off Unallocable

(Expenditure)

16.45 0.09 999 5.88 0.03 999

PBT 743.33 454.03 64 2536.25 2244.26 13

Capital Employed

(Segment Assets lessSegment Liabilities)

Steel 28289.53 25216.55 164 12 26755.39 23945.58 160 12Power 1981.00 1328.84 11 49 1811.47 1217.02 11 49

Others 803.79 771.79 5 4 900.03 501.66 5 79

Unallocated-13821.48

-17035.25

-80 -19-12701.73

-16188.46

-76 -22

Aggregate for the

company17252.84 10281.93 100 68 16765.16 9475.80 100 77

Var. (%) exceeding 999 has been truncated to 999LP: Loss to Profit

PL: Profit to Loss

EO: Extraordinary itemsFigures in Rs croreSource: Capitaline Corporate Database

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