JSW’s profit drops to Rs 1,495 crore as fuel, power costs soar

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Published: May 25, 2019 2:25:24 AM

The company exported 2.4 million tonne of steel, a decline of 34% y-o-y. Exports accounted for 15% of its total sales in FY19, compared with 23% a year ago.

The Ebitda margin of 19.8% was lower by 561 basis points during the fourth quarter.

JSW Steel’s consolidated net profit nearly halved in the March quarter from a year ago to `1,495 crore, as fuel and power costs soared while realisations dropped due to subdued steel prices. The net profit was in line with Bloomberg consensus estimates of about `1,487 crore.

Total expenses rose 13% year-on-year to `20,058 crore between January and March, thanks to a rupee depreciation that inflated the costs of imported inputs and consumables, and higher electrode and refractory costs. Power and fuel expenses stood at `3,507 crore and there was a substantial jump in changes in inventories of finished goods, work-in-progress and stock-in-grade to `1,694 crore in the March quarter from just `58 crore a year earlier. Meanwhile, the company’s realisations dropped 2% in the March quarter from a year earlier, as steel prices remained under pressure. As such, the domestic industry is bracing for higher steel dumping here by China, as Beijing’s trade war with Washington flares up.

JSW’s higher sales volumes helped revenues, as the revenue from operations rose about 5% y-o-y to `22,368 crore, beating analysts’ estimates of over `21,508 crore. The saleable steel sales for the quarter stood at 4.31 million tonne, up 3% from the same period last year.
Although the increase in expenses impacted the company’s operating income during the quarter, it was still higher than the analyst estimates of nearly `4,309 crore. The operating Ebitda (earnings before interest, tax, depreciation and amortisation) declined by over 16% y-o-y to `4,440 crore. The Ebitda margin of 19.8% was lower by 561 basis points during the fourth quarter.

Speaking to newspersons at an earnings conference, Seshagiri Rao, joint managing director and group CFO, said the demand for steel slowed down in the fourth quarter due to a lower consumption by the automotive sector and liquidity issues. “As a result, the crude steel production in India has remained flat, while the imports have grown and exports have fallen, which caused pressure on the overall steel prices,” he said. The company exported 2.4 million tonne of steel, a decline of 34% y-o-y. Exports accounted for 15% of its total sales in FY19, compared with 23% a year ago.

Giving guidance for the current fiscal, the company management said it expects an increase of 1.5% in the crude steel production to 16.95 million tonne and a 1.5% rise in saleable steel sales to 16 million tonne from the FY19 levels.
Meanwhile, the company board has approved certain new capex proposals, entailing a spend of `5,700 crore. These will include downstream investments for about `1,000 crore, cost saving projects of about `2,200 crore and mining and sustenance capex of about `2,000 crore. With this, JSW Steel is now implementing a cumulative capex spend of `48,715 crore (net of capex projects put on hold during the year) over FY18-FY21. With a cumulative cash outflow of `14, 371 crore in the last two years, the company now plans to spend about `34,300 crore over the next two years, with some spillover to FY22. These projects are planned to be funded by a mix of debt and internal accruals.

The company’s net debt as of March 31 rose to `45,969 crore from `38,000 crore a year ago. The net debt-to-equity ratio stood at 1.17x at the end of March, compared with 1.24x at the end of December 2018. Net debt-to-Ebitda stood at 2.23x against 2.16x at the end of December 2018.

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