JSW Steel's results below expectations, to improve in FY'16: Moody's

26 May 2015

JSW Steel's results for the financial year ended March 31, were below expectations but are likely to improve in 2015-16, credit rating agency Moody's Investors Service said today.

"JSW's sales volumes for FY2015 were 3 per cent lower than we had expected. Lower steel realisations year-over-year and a muted correction in domestic iron ore prices led to an annual consolidated EBITDA of Rs 95.1 billion, which was 14 per cent short of our estimates," said Kaustubh Chaubal, a Moody's Vice President and Senior Analyst.

Subdued domestic demand and a surge in imports from China, Russia and Korea exerted pressure on steel realisations, and steel prices in India fell 26 per cent between April 2014 and March 2015.

By contrast, JSW's steel realisations fell by only 9 per cent over the same period.

Looking ahead, domestic sales will drive growth at JSW in FY2016, Chaubal said.

According to the report, India's steel demand in the current financial year, 2015-16, will be supported by the pick-up in sales for commercial vehicles.

JSW expects 7 per cent increase in sales to 12.9 million tonnes (MT) during the current fiscal, it said.

In addition, cost pressures will likely ease during the year, it said, adding that while steel prices will remain under pressure, the cut in domestic iron ore and coking coal prices will help ease pressure on margins.

JSW also remains focused on easing margin pressure through cost reduction initiatives such as yield improvement, fuel efficiency, logistics and procurement, and shifts in the road/rail mix.