JSL profit slides 30% to ₹501 cr as nickel prices fall, misses estimates

Jindal Stainless Ltd (JSL), the Abhudhay Jindal-led company on Wednesday, reported a 30% year-on-year (y-o-y) fall in consolidated net profit to ₹501 crore in the March quarter owing to compromised margins amid falling nickel prices and increasing shipping costs in light of the ongoing Red Sea Crisis.

The company's consolidated net revenue stood at ₹9,454 crore, a 3% y-o-y fall from ₹9,765 crore during Q4FY23. The results missed Bloomberg analyst estimates of   ₹9,605.2 crore and ₹577.50 crore for revenue and net profit, respectively.

The company recorded a 10% y-o-y fall in earnings before interest, tax, depreciation, and amortisation (Ebitda) at ₹1,035 crore during the quarter. Margins, the company added, remained under pressure on account of negative inventory valuation due to continuously falling nickel prices. Around 40-50% of the company’s raw material cost can be attributed to nickel, it said.

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‘Volumes to be pushed by 20-25% in the current fiscal’

“We plan to increase the volumes by 20-25% in the current fiscal (FY25), so we will be taking our sales volumes up to 2 to 2.5 MTPA. As we remain very bullish on domestic demand, all sectors, and expect it to grow between 8-10% during the fiscal. Our Ebitda per tonne target for the year is around ₹18,000-20,000,” said Abhyuday Jindal, managing director, JSL. The company’s Ebitda per tonne for FY24 stood at ₹18,558.

JSL’s standalone sales volume for the quarter stood at 570,362 tonnes, up 12% YoY, buoyed by the government’s push for various infrastructure projects such as Gati Shakti, hence demand for stainless steel grew consistently throughout the quarter. There were robust sales across the automobile, wagons, coaches, metro, pipes & tubes, and other segments, the company said.

The company's exports to key international markets such as the US and Europe weakened. “We have started to witness recovery in certain segments of Europe, but in the US, we are still not seeing that, it is taking a bit longer there. Once we start seeing the recovery, we expect to export around 10-15% of our total volumes,” he added.

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The Red Sea crisis further exacerbated the pressure on margins, as it led to a steep increase in ocean freight charges and reduced the availability of containers, consequently compressing margins. The company continued to maintain an 11% proportion of exports in the geographical mix during Q4FY24, with the domestic market accounting for the rest 89%.

“When the crisis started, we saw that in some sectors, the ocean freight has gone up by even four times with 15 to 20 days additional time. The cost impact of this on our export was ₹50-60 crore on the bottom line in FY24,” the company said.

During the quarter the company also said that imports from China rose 20% y-o-y to reach around 140,000 tonnes. “With the consistent increase in Chinese dumping, the stainless steel market in India continues to be flooded by substandard exports, threatening the micro, small and medium enterprises (MSME) sector and disrupting the level playing field needed for fair competition and further innovation,” it added.

The company also announced the financial results for the year ended 31 March, reporting a consolidated profit of ₹2,693 crore, a 29% YoY increase with revenue of ₹38,562 crore, up by 8% YoY.

During the financial year, the company also announced major acquisition and expansion plans to the tune of ₹5,400 crore to augment its melting and downstream facilities to reach a capacity of 4.2 million tonnes per annum (MTPA) over the next three years. The company plans to spend around ₹4,700 crore of this in fiscal year 2025, along with ₹500 crore on maintenance. Around 85-90% of these expenses will be internally accrued with ₹800 crore being a spillover capex from FY24.