JSW Steel Q3 Results: Profit Misses Estimates As Construction Activity Slumps

JSW Steel Ltd.’s quarterly profit missed estimates as construction activity fell due to a heavy and extended monsoon season.

Net profit declined 88 percent year-on-year to Rs 187 crore in the quarter ended December, the steelmaker said in an exchange filing. That compares with the Rs 421.4-crore consensus estimate of analysts tracked by Bloomberg.

Revenue fell 12 percent year-on-year to Rs 17,805 crore. That’s in line with analysts’ estimate of Rs 17,686.5 crore. The earnings before interest, tax, depreciation and amortisation—a measure of a company’s operating performance—fell 51 percent to Rs 2,201 crore—the lowest since the fourth quarter of 2016.

“Heavy and extended rainfall, which impacted construction activity, impacted (the company’s) performance,” the steelmaker said in a statement on Friday. “We’re confident of achieving FY20 production and sales guidance.”

The Indian steel industry is facing a challenging environment amid slowing economic growth and the automobile industry—its key consumer—yet to recover from its worst slowdown in more than two decades.

Margin contracted to 12.36 percent in the October-December period compared to 22.15 percent in the same quarter last year.

Falling prices of the alloy didn’t help either. According to Seshagiri Rao, JSW Steel’s joint managing director, steel prices fell 23 percent year-on-year in the December quarter.

“The fall in steel prices in the quarter ended September was entirely reflected in the third quarter,” Rao said at a post-earnings conference. The contracts with automotive customers also got repriced in October, which brought down the company’s net sales realisation by 7 percent over the previous quarter.

But the fourth quarter will be better, Rao told BloombergQuint in an interview, because of higher net sales realisation, stable cost of production, and more volumes.

On Friday, JSW Steel shares rose 1.73 percent to Rs 271.25 apiece on the NSE while the benchmark Nifty 50 gained 0.56 percent to end the day at 12,248.25 points. The earnings were announced after market hours.