JSW Steel Ltd’s Net profit observes a decline for the June quarter (Q1FY23). As reported by the company, higher input costs have led to a 38% drop (Q4FY22 ) in standalone Ebitda (earnings before interest, taxes, depreciation and amortisation) per tonne of Rs 8,318.

As per media reports, the company’s standalone Ebitda per tonne in Q1 was above Rs 12,000 per tonne after adjusting for various one-offs such as unrealised mark-to-market losses on forex loans and export duties and inventory value markdowns. JSW’s subsidiaries observed a dull quarter. The company’s reported consolidated net profit shrank by 75% to Rs 839 crore. There remains a challenging way forward.

As far as input costs are concerned, there is hope. Since coking coal and iron ore prices have decreased in recent months. Coking coal prices are expected to dip $50-60 per tonne in Q2FY23 sequentially. However, reduction in domestic steel prices thanks to the recently imposed export duty. Moreover, the unfavourable demand scenario ensures that profit margins can be expected to remain under pressure in Q2.

Considering the situation, JSW has decided to bring down its capital expenditure (Capex) guidance for FY23. While it undoubtedly seems to be a sensible and planned move, it is more important than how investors eventually see the debt concluding. The company’s consolidated net debt (till 30 June) increased to Rs 67,221 crore from Rs 56,650 crore on 31 March, mainly due to working capital build-up. JSW Group aims to end this fiscal with net debt at similar levels as FY22.

As JSW’s shares have declined by 20% so far in FY23, the company is hopeful regarding the potential withdrawal of the export duty on steel. While demand revival remains a concern, it is equally essential that operational costs are minimised.