JSW Steel Reports Higher Q2 Profits Driven by Volume Growth and Operational Efficiency

JSW Steel reported a substantial increase in profits for the September quarter, overcoming an initial bearish phase through higher volumes, improved operational efficiency, and inventory dilution. According to Jayant Acharya, Joint Managing Director and CEO, demand improved in August and September as the monsoon weakened and public capital expenditure picked up, aiding a recovery in steel prices.

During the quarter, Blast Furnace 3 at Vijayanagar reached approximately 90 percent utilization in September. The company drew down 2.10 lakh tonnes of inventory built up in the first quarter. Despite higher input costs and geopolitical disruptions, stronger sales volumes helped improve absolute EBITDA. Capital expenditure exceeded ₹11,100 crore in the first half of the financial year, largely funded through internal accruals.

Addressing the sequential decline in EBITDA per tonne, Acharya noted that input costs—including coking coal, iron ore, ferroalloys, zinc, and energy—increased while net realisations fell. Costs rose by about ₹1,300 per tonne, and net realisations declined by ₹500, reducing margins by ₹1,800 per tonne from the previous quarter. Coking coal prices are expected to have an estimated $25 impact in the third quarter. However, price increases implemented previously and in October, along with larger blast furnaces and lower fixed costs, are expected to support margins.

JSW Steel anticipates higher second-half volumes to deliver better absolute EBITDA. Consumption is projected to rise from about 85 million tonnes in the first half to approximately 92 million tonnes in the second half, taking full-year demand to roughly 177 million tonnes. Prices are expected to remain range-bound.

On the debt and capital expenditure front, JSW Steel's total debt declined to about ₹44,000 crore, with a net debt-to-EBITDA ratio of 1.28 times and net debt-to-equity of 0.39 times. The total capex outlay as of October 1 stands at ₹1.48 lakh crore over five to six years, implying annual spending of ₹25,000 to ₹30,000 crore, which the company expects to fund mostly through internal accruals. The company has also substantially reduced its foreign currency exposure by repaying over ₹29,000 crore of debt in the first half and prepaying a $500-million bond in October.

Regarding external factors, Acharya stated that the company is monitoring finished steel imports, particularly those originating from free trade agreement countries. European carbon measures, such as the Carbon Border Adjustment Mechanism, will present challenges for exports, though JSW Steel's primary focus remains on the domestic market, which accounts for 87 to 90 percent of its business. The company remains committed to its net-zero emissions target by 2050, scaling up renewable energy capacity and deploying advanced blast furnace technologies.

"JSW Steel's performance highlights the importance of operational efficiency and robust inventory management during periods of fluctuating input costs. By focusing on domestic demand, reducing foreign currency debt, and funding capital expenditure primarily through internal accruals, the company has demonstrated strong balance sheet resilience. Managing external trade dynamics and carbon regulations will be critical for long-term stability in the manufacturing sector." — Dr. Shishir Gupta, Founder & CEO, StartupLanes