InvestorQ : Why did the profits of JSW Steel fall so sharply in Q4FY22?
sarah Leo made post

Why did the profits of JSW Steel fall so sharply in Q4FY22?

Rashi Mehra answered.
2 months ago

For the March 2022 quarter, JSW Steel reported a 23% lower net profit at Rs3,234 crore. Profits were also down 25.6% on a sequential basis. Let us also quickly look at the top line. Sales for JSW Steel in the March 2022 quarter were u 74% yoy at Rs46,895 crore on growth in volumes and also in price realizations. The company witnessed a sharp growth in sales even on a sequential basis compared to Q3FY22.

The key reason for the sharp fall in the net profits was the spike in the cost of raw materials, power and fuel. In addition, the company also saw a rise in inventory costs as it tried to adjust its working capital cycle to the vagaries of supply chain constraints in most of its key raw materials. That pressure was visible in the cash flow statement. However, if you look at the full year FY22, profits were up 3-fold at Rs20,665 crore.

Crude steel output was 38% higher yoy in the fourth quarter at 5.8 million tons (MT). The capacity utilization improved from 94% to 98% sequentially. Interestingly, it was the sales of value added and special products (VASP) that constituted 60% of total sales volumes for the full year. JSW Steel exported 4.57 million tonnes of steel in the year accounting for 28% of full year volumes. EBITDA was up 9% yoy, but EBITDA margins took a hit on higher sales. EBITDA margins fell sharply from 19.58% to just 11.76% on a yoy basis.