Mumbai: While steel requirement remains as tepid in India & iron ore in short supply, steel producer JSW Steel has reported a sharp jump in earnings prior to interest, tax, depreciation & amortisation (Ebitda) per tonne of steel produced. In the first quarter, JSW Steel revealed an Ebitda per tonne of Rs 8,545, against Rs 8,053 in the previous quarter, & Rs 6,859 in the year-ago period. The firm’s exports increased 121 % year-on-year even as high-margin automobile sales increased 37 %. Motivated by higher volumes, the standalone business’ operating income increased 41 %, year-on-year, to Rs 2,461 cr.
JSW Steel has been reporting a steady improve in Ebitda per tonne because the first quarter of FY14, as benefits are flowing in from measures taken to cut expenses & enhance margins. Experts believe the sharp delta in earnings is due to lower coking coal prices & enhancement in output from ISPAT.
In 2012, the company decided to set up a coke oven & a pellet plant. Both these measures have considerably lowered fuel expenses & enhanced the productivity. Goutam Chakraborty, expert at Emkay Global, says: “JSW Steel’s Ebitda/tonne has been enhancing due to enhanced effectiveness & higher proportion of value-added products, despite higher iron ore prices. The coke oven battery has started contributing in reducing expenses. The firm has set up a pellet unit also, which would help save costs further.”Sheshagiri Rao, joint MD & group chief financial officer at JSW Metal, says: “The full benefit of the coke capacity & pellet plants will be experienced in the second and third areas, as 47 % of pepsi potential and 76 % of pellet could be used in the 1st quarter.”
The company is also diversifying into value-added products & intends to devote 33 % of its 14.3-million tonne capacity towards value-added products. The share of value-added steel has already gone up to 29 % in Q1 of FY15 from 25 % in the year-ago period. Rao says the company is looking at another 4 % improve in this share will give the top line & bottom line a boost. The company has sold 2.88 million tonnes of steel during the quarter & experts believe it will meet its volume FY15′s quantity guidance of 12-million tonne.
The company has also started importing high-grade iron ore, as it is less expensive than domestic ore. Given the sweet spot the company is in, experts believe upgrades are likely.
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