India’s JSW Steel forecasts positive infrastructure demand in the coming quarters, despite a 64% decline in Q1 profit due to stagnant demand and higher costs.
Bollywood Fever: India’s largest steelmaker by market cap, JSW Steel, anticipates a positive momentum in infrastructure demand in the coming quarters after reporting a larger-than-expected decline in first-quarter profit due to stagnant demand and higher costs. The company expects government spending to rebound and a robust outlook for private capital expenditures.
For the quarter ended June 30, JSW Steel reported a 64% decline in profit to 8.45 billion rupees ($101 million), surpassing analyst expectations of a 53% decline, as per LSEG data.
India’s April-June quarter saw the world’s largest elections, with nearly 1 billion people eligible to vote. Analysts had anticipated lukewarm demand in sectors like infrastructure and manufacturing, which had seen heightened demand in previous quarters. Additionally, rising prices of key raw materials, such as iron ore, led to a nearly 7% year-on-year increase in expenses.
The most-traded iron ore on China’s Dalian Commodity Exchange (DCE) averaged 848 yuan per metric ton during April-June, a 46% increase from the same period in 2023.
“Sequentially, there was an uptick in steel prices and raw material costs fell,” said Kunal Kothari, Research Analyst at Centrum Broking. “However, lower volumes due to a maintenance shutdown partially offset the QoQ rise.”
Adding to concerns, steel prices in India remained under pressure as the country net imported cheaper finished steel from top-producer China, which has been facing strained steel demand.
Despite these challenges, revenue from operations rose around 2% to 429.43 billion rupees, surpassing analysts’ estimates of 415.75 billion rupees.
JSW Steel remains optimistic about the future, anticipating increased government spending and a strong outlook for private investments to drive infrastructure demand in the upcoming quarters.
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