Sajjan Jindal-promoted JSW Steel, India’s second largest private sector steel producer, reported that profits nearly halved in the March quarter on account of mounting costs and low realizations.
Consolidated net profit fell 48% from the ₹2,879 crore it had reported in the three months ended March 2018, to ₹1,495 crore, as costs of key inputs such as power, fuel and consumables rose due to rupee depreciation and higher electrode and refractory costs. Consolidated revenue for the same period stayed flat at ₹19,264 crore.
Crude steel production fell 3% this quarter from the year earlier to 4.17 million tonnes (mt). Stand-alone steel sales rose 2% from 4.22mt to 4.29mt during the period under consideration. Operating Ebitda (Earnings before interest, taxes, depreciation and amortization) for the quarter declined 14% year-on-year to ₹4,341 crore and the Ebitda margin stood at 22.03%. Ebitda per tonne was ₹10,302 for the quarter. While sales to the auto sector flattened out for the quarter, growth in retail sales and sales of value-added products picked up.
For the full year, it posted net profit of ₹7,524 crore, up 23% year-on-year from ₹6,113 in FY18. Revenue from operations for the same period rose 16% to ₹84,757 crore. Net debt rose to ₹45,969 crore, up from ₹38,000 crore at the end of FY18. JSW Steel, which is currently implementing a massive capital expenditure programme, has decided to raise its capex programme by ₹5,700 crore to ₹48,715 crore. Out of this, ₹1,000 crore will go into downstream investment, ₹2,200 crore into cost-saving projects and ₹2,000 crore into mining and sustenance capex. Of this total, the company will spend ₹34,300 crore over FY20 and FY21.
The planned blast furnace (BF3) shutdown, which would have expanded capacity by 1.7mt, has now been postponed. Once the capital expenditure programme at Dolvi steel mill is complete, it will again be taken up, said M.V.S. Seshagiri Rao, joint managing director and group CFO, JSW Steel.
For FY20, the company’s crude steel production guidance stood at 16.95mt and saleable steel sales at 16mt, an increase of 1.5% on the actual numbers for FY19. This would translate into 95% capacity utilisation for JSW Steel. While the World Steel Association’s guidance for 2019 was 1.3% growth in global demand, Rao said demand in India will grow by 6.5-7%.
At the board meeting, the company’s management passed a resolution to raise up to ₹14,000 crore through either debt or equity instruments through a qualified institutional placement process.