JSW Group revenue down by $2 billion in FY20

Suresh P Iyengar Mumbai | Updated on August 14, 2020

The combined EBITDA loss incurred by the overseas subsidiaries of JSW Steel widened to ₹1,240 crore last fiscal against a loss of ₹280 crore in FY19   -  REUTERS

Steel business takes huge hit in US, Italy, trouble in domestic steel furniture and paints venture

Money-guzzling overseas business, misadventure in India and a struggling steel business have shaved off JSW Group’s revenue by 15 per cent, or $2 billion (₹14,800 crore), last fiscal to $12 billion.

Led by Sajjan Jindal, the conglomerate’s steel business has taken a huge hit in the US and Italy, besides the trouble in the company’s domestic steel furniture and paints venture.

In fact, JSW Steel last fiscal made a provision of ₹1,230 crore on its investment in its US subsidiaries — JSW Steel Inc and JSW Steel Ohio, Inc — and its iron ore mine in Chile. So far, JSW Steel has invested ₹6,130 crore in the US. This apart, JSW Italy Piombino has also been struggling due to weak demand.

The combined EBITDA loss incurred by the overseas subsidiaries of JSW Steel widened to ₹1,240 crore last fiscal against a loss of ₹280 crore in FY19.

Last month, JSW Steel suspended production at Ohio and laid off 160 workers. It also shut its pipe mill in Baytown to optimise production and cut costs.

The iron ore mines in Chile have hardly contributed to the company’s bottom-line ever since they were acquired in 2007. They remained non-operational for long due to weak international iron ore markets.

Burning cash

Vishal Chandak, Research Analyst, Emkay Research, said the overseas business of JSW Steel had incurred cash losses and continue to burn cash due to subdued demand. “We remain sceptical of all the overseas investments made by the company as history suggests that outbound M&A for Indian steel companies have not been a big success till date,” he said.

Back home, JSW, early this year, had shut down its steel furniture business JSW Forma less than a year after sinking in a major chunk of the planned ₹250-crore investment.

The group had also ventured into decorative paint business with the launch of JSW Paints. However, it could make little inroads due to the real estate crisis and credit squeeze in the economy. The major client of the paint business is JSW Steel’s colour-coated division besides steel companies in the colour-coated steel business.

The group’s cement business was also hit by the economic slowdown, and the company’s plan to invest ₹2,900 crore to enhance its capacity from 14 million tonnes per annum (mtpa) to 25 mtpa was deferred.

Published on August 13, 2020

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