Jindal Steel & Power Limited (JSPL), India's fourth-largest steelmaker, announced its December quarter financial results after market hours on Friday, revealing a significant decline in profitability. The company reported an 80% drop in net profit attributable to owners, falling to ₹190 crore from ₹951 crore in the same quarter last year, according to exchange filings.
Financial Performance and Market Reaction
This profit figure fell well short of the ₹526-crore average estimate from a Bloomberg poll of 11 analysts. Earlier in the day, Jindal Steel's shares closed 1.91% lower on the Bombay Stock Exchange, while the Sensex ended 0.36% down. The weak quarterly performance was attributed to multiple factors including subdued steel prices, elevated input costs, and a one-time loss related to labor code implementation.
Revenue Growth Versus Profit Decline
Despite the profit slump, the company reported a 10.9% increase in revenue to ₹13,026 crore from ₹11,751 crore in the corresponding quarter last year. This revenue growth was driven by higher steel production and increased sales volumes. However, these positive factors were completely offset by lower steel realizations during the quarter.
The steelmaker's consolidated crude steel production surged 25% to 2.51 million tonnes from the September quarter, while sales volumes climbed 22% to 2.28 million tonnes. Despite these operational improvements, EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) fell 25% to ₹1,634 crore from ₹2,184 crore in the same quarter last year.
Expert Analysis on Profitability Pressures
Suman Kumar, Assistant Vice-President for Metals and Mining at brokerage Philip Capital, commented on the results: "The results clearly indicate an impact on EBITDA, which has declined due to higher-than-anticipated raw-material costs. Beyond this expense, profitability has seen a further drop due to an increase in depreciation and interest expenses."
He added: "Weak steel prices during the quarter also weighed on performance. While revenues were higher due to increased production and volumes, the benefit of higher volumes was more than offset by lower realizations."
Steel Market Conditions and Pricing Pressures
The steel industry faced challenging market conditions during the quarter. Prices of steel used in automotive and home appliance manufacturing fell to a nine-month low in November. Meanwhile, construction and infrastructure-grade steel reached its cheapest level in nearly five years, primarily due to oversupply and weak demand from major infrastructure projects.
Demand was further impacted after a temporary safeguard duty lapsed on November 7th, with no clarity on extension until the end of December. This regulatory uncertainty added to the pricing pressures faced by domestic steel producers.
Capital Expenditure and Debt Position
Jindal Steel's net debt increased to ₹15,443 crore as of December 31st from ₹14,156 crore at the end of September. This rise was primarily driven by ongoing capital expenditure, with the company incurring ₹2,076 crore during the quarter for expansion projects at its Angul facility in Odisha.
The three-million-tonnes-per-annum basic oxygen furnace-III at Angul remains on track for commissioning in the fourth quarter of FY26. Once operational, this facility will increase the company's steelmaking capacity to 15.6 million tonnes per annum, representing significant expansion potential.
One-Time Charges and Labor Code Impact
The company recognized a one-time exceptional charge of ₹55 crore during the quarter related to gratuity and compensated absences. Jindal Steel noted that it is currently evaluating whether the new labor codes would have any additional impact on employee benefits in future quarters.
This comprehensive financial report from Jindal Steel highlights the complex challenges facing India's steel industry, where production growth and revenue increases are being undermined by pricing pressures, rising costs, and regulatory changes affecting both operations and financial performance.
