JSW Steel reported a tripling of its September quarter profit, supported by strong sales volumes and inventory management. While rising raw material costs like coking coal created pressure, the company utilized price adjustments to protect margins. Investors should monitor the company's ability to sustain volume levels and navigate cost headwinds in the second half of the year.
JSW Steel posted a significant increase in profit for the September quarter, with net profit tripling compared to the same period last year. This performance was driven by a rise in sales volumes and operational improvements, despite a challenging cost environment. The company successfully utilized 2.10 lakh tonnes of inventory accumulated earlier in the year, which helped in managing working capital effectively.
Operational efficiency played a key role in these results. The company reported that blast furnace utilization at its Vijayanagar plant reached approximately 90 per cent in September. This high level of activity provided the necessary operational scale to maintain margins even as input costs increased. However, the company faced significant pressure from rising prices of essential inputs, including zinc, iron ore, and coking coal, which collectively pushed operating expenses up by about ₹1,300 per tonne.
To counter these cost increases, JSW Steel implemented price adjustments throughout October. Management expects these changes to serve as a buffer against potential cost pressures, particularly the estimated $25 per tonne headwind from coking coal anticipated in the third quarter. The company plans to rely on higher volumes and fixed-cost reduction strategies to support its earnings and manage further margin erosion.
Regarding capital allocation, JSW Steel invested over ₹11,100 crore in expansion projects during the first half of the year. These expenditures were funded entirely through internal cash flows. Simultaneously, the company focused on strengthening its balance sheet by repaying over ₹29,000 crore in debt during the same period, which included the early retirement of a $500-million bond. The company reported a net debt-to-EBITDA ratio of 1.28 times, indicating a stable leverage position compared to the broader steel industry.
Looking ahead, JSW Steel remains heavily focused on the Indian market, which is expected to account for 87-90 per cent of its business. While full-year domestic steel consumption is projected to reach approximately 177 million tonnes, the export market faces uncertainty due to the European Carbon Border Adjustment Mechanism (CBAM) regulations. The company is actively working on sustainability initiatives, including scaling its renewable energy capacity to 2.5 GW and adopting new technologies for carbon reduction.
For investors, the key monitorables will be the actual demand levels in the second half of the year, the company's ability to pass on cost increases to customers, and the successful commissioning of its ongoing expansion projects. The management's success in balancing debt reduction with growth spending will also remain a point of interest.