JSW Steel Q2 operating profit up 95% at Rs3,265cr

JSW Steel Q2 operating profit up 95% at Rs3,265cr

JSW Steel reported an increase of 9.63% in top line sales revenues for the Sep-20 quarter at Rs19,264cr. The operating profits for the quarter ended Sep-20 was 95.04% higher at Rs3,265cr while the net profits fell by just 37% at Rs1,595cr on a yoy basis. However, this net profit may not be comparable as JSW has a hug deferred tax credit in Sep-19 quarter.

This had a logical impact on the margins of the company. For the Sep-20 quarter, the operating profit margins or OPM expanded by 740 basis points at 16.95% while the net profit margins or NPM for the quarter was lower at 8.28%. However, this was more due to the Rs1976cr deferred tax credit that JSW Steel got in the Sep-19 quarter.

Financial highlights for Sep-20 compared yoy and sequentially

Particulars Sep-20 Quarter Growth (yoy) Growth (qoq)
Total Revenues Rs19,264cr +9.63% +63.50%
Operating Profit Rs3,265cr +95.04% Not Applicable
Net Profits Rs1,595cr -37.11% Not Applicable
Key Ratios Sep-20 Quarter Sep-19 Quarter Jun-20 Quarter
Diluted EPS Rs6.59 Rs10.59 Rs-2.34
Operating Margins 16.95% 9.53% 2.50%
Net Profit Margin 8.28% 14.43% -4.94%

Key takeaways from the Sep-20 quarter results

  • JSW Steel seems to have largely recouped its pre-COVID levels of operating sales and profits and a little more. Sequential growth may not be too relevant in this case. The sharp improvement in operating performance was largely on the back of a sharp fall in the cost of materials used due to global weakness in input prices.

  • For the first six months of FY21, the net cash generated from operating activities was marginally higher Rs5,685cr, helped by a sharp fall in the interest expense during the half year ending on Sep-20.

  • In volume terms, JSW Steel reported 30% sequential growth in crude steel output at 3.85 MT, 47% growth in saleable at 4.12 MT. The company lowered debt by Rs1,635cr during the quarter taking the debt/equity ratio to 1.43x and net debt/EBITDA to 4.73x.