It’s that time of the year when major metal producers announce their first quarter results. The first off the block was JSW Steel. More steel producers will follow suit in the coming days.
JSW’s quarterly result was the good part of this fiscal year’s Indian steel story. The turnover and net sales for the quarter stood at approx US $1.7 billion and $1.6 billion, respectively, showing a growth of 30 percent and 28 percent over the corresponding quarter of previous year, mainly due to higher volume and improved sales realization.
The company posted a net profit after tax of approximately US $48 million.
Based on the JSW result, the prevailing economic situation, the sentiments of sector analysts and the re-alignments by some other biggies in the business, the news from the Indian steel sector so far has been a mixed bag.
The Indian stock markets, though, gave a “thumbs down” to this sector when soon after the JSW result was declared, steel shares took a major tumble.
Clearly, the Bombay Stock Exchange (BSE) players showed that they had no faith in the Indian steel story for now — which meshes with the steel sector’s experts’ point of view. The brokers and investors were taking cues from the developments in Europe. That’s where the bad news lies.
While the JSW results were positive, the stress of “difficult” economic conditions in Europe by one of the world’s leading steel producers, ArcelorMittal, and Tata Steel provided enough hints of the trying times ahead.
While India may still be tagged a market with some potential for steel despite shortages of iron ore, the rupee depreciation and pressure from Chinese steel producers, and the failing European economy have already delivered some body blows to ArcelorMittal and Tata Steel.
Steel bellwether ArcelorMittal also announced its second quarter results last week. It barely made it past earnings estimates, and issued a cautious outlook for the rest of the year, affecting market sentiments in another faraway bourse, the BSE.
The “bad” spirit also affected another major, Tata Steel, and its performance at the global level.
Continued in Part Two.
Sohrab Darabshaw contributes an Indian perspective to MetalMiner.