Chaubal said that subdued domestic demand and a surge in imports from China, Russia and Korea exerted pressure on steel realizations, and steel prices in India fell 26% between April 2014 and March 2015.
Moody's Investors Service says that JSW Steel Limited's audited consolidated results for the fiscal year ended 31 March 2015 (FY2015) were below Moody's expectations but should improve in FY2016.
"JSW's sales volumes for FY2015 were 3% lower than we had expected. Lower steel realizations year-over-year and a muted correction in domestic iron ore prices led to an annual consolidated EBITDA of INR95.1 billion, which was 14% short of our estimates," says Kaustubh Chaubal, a Moody's Vice President and Senior Analyst.
Chaubal explained that subdued domestic demand and a surge in imports from China, Russia and Korea exerted pressure on steel realizations, and steel prices in India fell 26% between April 2014 and March 2015. By contrast, JSW's steel realizations fell by only 9% over the same period.
"Looking ahead, domestic sales will drive growth at JSW in FY2016," adds Chaubal.
Moody's analysis is contained in its just-released report titled "JSW Steel Limited: Full Year Operating Results Below Expectations, But
Expected Recovery Ahead," and is co-authored by Chaubal, and Vincent Tordo, an Associate Analyst.
Moody's report says that in FY2016, demand for steel in India will be supported by the pick-up in sales for commercial vehicles. The report
also says that JSW expects a 7% increase in sales to 12.9 million tons for FY2016.
In addition, cost pressures will likely ease during FY2016. Moody's report says 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.
Moody's expects JSW's leverage metrics to stay within the parameters of its Ba1 corporate family rating over the next 12 months. In particular, Moody's says JSW's leverage should stay just under 4.0x in FY2016.
"JSW's sales volumes for FY2015 were 3% lower than we had expected. Lower steel realizations year-over-year and a muted correction in domestic iron ore prices led to an annual consolidated EBITDA of INR95.1 billion, which was 14% short of our estimates," says Kaustubh Chaubal, a Moody's Vice President and Senior Analyst.
Chaubal explained that subdued domestic demand and a surge in imports from China, Russia and Korea exerted pressure on steel realizations, and steel prices in India fell 26% between April 2014 and March 2015. By contrast, JSW's steel realizations fell by only 9% over the same period.
"Looking ahead, domestic sales will drive growth at JSW in FY2016," adds Chaubal.
Moody's analysis is contained in its just-released report titled "JSW Steel Limited: Full Year Operating Results Below Expectations, But
Expected Recovery Ahead," and is co-authored by Chaubal, and Vincent Tordo, an Associate Analyst.
Moody's report says that in FY2016, demand for steel in India will be supported by the pick-up in sales for commercial vehicles. The report
also says that JSW expects a 7% increase in sales to 12.9 million tons for FY2016.
In addition, cost pressures will likely ease during FY2016. Moody's report says 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.
Moody's expects JSW's leverage metrics to stay within the parameters of its Ba1 corporate family rating over the next 12 months. In particular, Moody's says JSW's leverage should stay just under 4.0x in FY2016.
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