JSW Steel withstands turbulence in commodity prices

JSW Steel Ltd’s shares have withstood the turbulence in commodity prices much better than other metal producers. While the Nifty Metal Index has fallen 16.8% in the past year, JSW Steel shares have declined 9%. The company’s March quarter results should reinforce this trend. Despite input cost pressures and soft product prices, JSW Steel expanded its consolidated revenues 10% sequentially. Operating profit fell 1.4%. But the quantum of drop is lower than Street estimates. This was possible through higher volumes, which at 4.3 million tonnes (mt) exceeded estimates. Sales volumes of the stand-alone entity were 4.29 mt, higher than the 3.68 mt in the December quarter, and the 4 mt estimated by the Street. Higher volumes drove up stand-alone revenues by 7%. So, even as profitability has taken a notable hit (down two percentage points), the fall in operating profit was confined to 2% sequentially. Earnings may not be growing, but it is important to note that JSW Steel has mitigated the impact of soft product prices. The company is busy expanding capacity, and plans to invest about ?34,300 crore over the next two years through a mix of debt and internal accruals.