JSW Steel’s consolidated net profit declined over 20% on a year-on-year basis to Rs 3,343 crore, missing the Street’s estimates of Rs 4,558.20 crore for the quarter ended March 31, 2022, due to an exceptional item of Rs 741 crore primarily towards impairment in its US subsidiary.
“A subsidiary in USA received a final arbitration order on its dispute with the lessors of coking coal mining lease and plant lease and a consequential notice of termination of lease. Accordingly, an impairment provision of Rs Rs 10 crore is recorded towards the value of property, plant & equipment, goodwill, other assets and accrual of resultant liabilities. Further, the company has recognised a provision of Rs 31 crore towards impairment of capital work In progress at Ranchi, Jharkhand based on assessment of the recoverable value. The same is disclosed as an exceptional item,” company said in notes to the profit and loss account.
However, a steady demand environment in India led to a 74% y-o-y increase in the company’s revenue from operations to Rs 46,895 crore. “The domestic steel industry continued to see steady demand from the government’s continued focus on public infrastructure. Investments in the construction and infrastructure sector continued to support steel consumption. Hence the steel industry witnessed an increase in finished steel consumption by 7.2% in Q4 FY 2021-22 over the previous quarter,” it said in a statement.
On the back of this strong demand environment, the company achieved an average capacity utilization of 98% for the March quarter versus 94% in the quarter ended December 2022 from the existing standalone operations, and further supplemented by ramp-up of the Dolvi phase-II expansion.
However, inflation exacerbated by the sharp rise in energy prices impacted the Ebitda margins (earnings before interest, tax, depreciation and amortisation) during the quarter, which declined sharply by 1,170 basis points on a y-o-y basis to 19.6% in the quarter ended March 31, 2022. The Ebitda during the quarter rose about 9% y-o-y to Rs 9,184 crore.
The company’s consolidated saleable steel sales for the quarter was at its highest-ever at 5.99 million tonnes, a rise of 47% y-o-y, while the consolidated crude steel production stood at 5.81 million tonnes, which was also the highest-ever with an increases of 38% y-o-y. For the full year ended March 31, 2022, JSW Steel recorded consolidated crude steel production of 19.51 million tonnes, while the consolidated saleable steel sales stood at 18.18 million tonnes.
The company’s consolidated net profit for the full year ended March 31, 2022 came in at Rs 20,938 crore, a near 2.7x rise over last year. The revenue from operations surged 83% over last year to Rs 1.46 trillion. The Ebitda during the year came in at Rs 39,007 crore, a rise of a sharp 94% versus FY21.
The consolidated net debt to equity stood at 0.83x at the end of the March quarter versus 1.02x at the end of December 2021 and net debt to Ebitda stood at 1.45x against 1.73x at the end of Q3FY22. During the quarter, net debt reduced by Rs 9,662 crore.
The company in a statement also said that the board of directors of JSW Steel, Creixent Special Steels Limited (CSSL) and JSW Ispat Special Products Limited (JISPL) at their respective meetings held on Friday, have approved a scheme of arrangement for the amalgamation of JISPL and CSSL with and into JSW Steel. The merger will bring synergies across the business and value chain, and enhance JSW Steel’s presence in central India.
The scheme is subject to approval of the respective shareholders and creditors of JSW Steel, JISPL and CSSL, the stock exchanges, Securities and Exchange Board of India, National Company Law Tribunal and other regulatory approvals.