JSW Steel revises downward production, sales and capex guidance

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Published: October 24, 2019 2:28:23 AM

The company has revised its steel production target to 97% of 16.95 million tonne per annum guided at the beginning of the fiscal and the saleable steel target to 97% from 16% guided earlier.

On the operational front, the steel producer said its earnings before interest tax and depreciation for the quarter fell 44.5% on negative EBITDA from companies in the US and Europe.

JSW Steel has revised downwards its production, sales and capital expenditure guidance for the FY20 on economic headwinds that impacted the overall earnings in the July-September quarter of 2019.

The company has revised its steel production target to 97% of 16.95 million tonne per annum guided at the beginning of the fiscal and the saleable steel target to 97% from 16% guided earlier.

The capital expenditure, which was earlier expected to be Rs 15,708 crore for FY20, has been revised downwards to Rs 11,000 crore.
Seshagiri Rao, group chief financial officer of JSW Steel, told reporters, “The company has identified certain projects, comprising some downstream projects like continuous annealing line at Vasind Works, second tinplate line at Tarapur Works and colour coating line at Rajpura to continue with the capex. However, we have deferred Rs 4,700 crore worth of spends to the next year. This implies a revised cash flow plan of Rs 11,000 crore for the current fiscal year.”

On the operational front, the steel producer said its earnings before interest tax and depreciation for the quarter fell 44.5% on negative EBITDA from companies in the US and Europe. The company’s US subsidiary, US Plate and Pipe Mill, reported an EBITDA loss of $11.2 million for the quarter, mainly due to lower realisation and inventory write-down of $3.5 million. The US Ohio (Acero) subsidiary reported an EBITDA loss of $31.6 million for the quarter, which includes an inventory write-down of $13.2 million. The Italian subsidiary also reported EBITDA loss of 6.9 million euro.

The operating margins for the quarter fell 732 bps to 15.48% on lower realisations that fell around 16% on year and 10% quarter-on-quarter. Steel prices in the domestic market are trading at a discount of 4% from landed international prices from South Korea and Japan, which impacted the overall margins and forced the company to look at the international market.

Revenues from operations were down 18.5% on year to Rs 17,572 crore on lower sales. Weaker activity levels on the back of muted investment spend, credit squeeze and slowdown in the automotive sector resulted in overall subdued steel demand. Consequently, saleable steel sales for the quarter fell 9% on year to 3.60 million tonne.

“To partially mitigate the headwind of weak domestic demand, the company has increased its focus on value added exports, which surged by 68% on year to 1.09 million tonne. Exports accounted for 31% of consolidated saleable steel sales during the quarter. Consolidated sales volumes declined 9% on year and 3% on quarter to 3.56 million tonne,” Rao said.

The net profit was up 21.51% to Rs 2,536 crore on account of one-time reversal of deferred tax provisions made during the previous tax regime.

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