JSW Steel Q4 profit plummets 87 per cent due to low demand

Our Bureau Mumbai | Updated on May 22, 2020 Published on May 22, 2020

The JSW Steel Ltd logo at the company's manufacturing facility in Dolvi, Maharashtra   -  Bloomberg

Plans to raise ₹7,000 crore in India and $2 billion overseas; project completion delayed

JSW Steel has reported that its net profit plunged 87 per cent in the March quarter to ₹188 crore from ₹1,495 crore on the back of sharp fall in demand.

The gross sales were down 20 per cent at ₹17,556 crore (₹21,837 crore).

The company has announced a dividend of ₹2 a share, leading to an outgo of ₹483 crore (₹1,195 crore).

It plans to raise ₹7,000 crore through issuance of equity or non-convertible debentures.

It will also mobilise long-term funds of $2 billion from international markets through issuance of non-convertible senior unsecured fixed rate bonds, foreign currency convertible bonds or other instruments convertible into equity shares optionally.

The company will use the funds raised for capital expenditure and repayment of loans.

Amid slowing demand, the company has maintained its production target for this fiscal at last year’s level 16 million tonne and sales marginally lower at 15 mt (15.08 mt).

The company during the March quarter has made an impairment provision of ₹1,309 crore, including ₹852 crore towards diminution in value of investments in Chile mining operations, ₹377 crore for doubtful recovery of interest from its subsidiary at Baytown in the US and ₹80 crore towards retirement of certain fixed assets in India.

Capex cut

Consolidated steel sales were down 15 per cent to 3.65 mt while sales in domestic market were lower by 5 per cent.

The company has halved the capex for this fiscal to ₹9,000 crore against the earlier guidance of ₹16,340 crore.

Last October, it revised down the planned capex spend for FY'20 to ₹11,000 crore from ₹15,700 crore announced last May. However, it spent only ₹10,200 crore last fiscal.

Project delay

The company has also delayed completion of various ongoing projects including doubling of capacity to 10 mtpa along with the captive power plant and Coke Oven Phase-2 at Dolvi in Maharashtra to second half of this fiscal and the 8 mtpa pellet plant and the Wire Rod Mill at Vijayanagar are expected to be commissioned in Q2FY21.

The CRM1 complex capacity expansion at Vijayanagar from 0.85 mtpa to 1.80 mtpa is expected to be commissioned progressively in Q2 and Q3 of FY'21.

The downstream modernisation-cum-capacity enhancement projects at Vasind and Tarapur and the Colour coating line at Kalmeshwar are now expected to be finished in the second half of this fiscal.

The company has, therefore, reduced planned capex on these ongoing projects to about ₹8,200 crore.

Iron ore mining

Last fiscal the company had emerged a preferred bidder for seven iron ore mines in Karnataka and Odisha. An additional capex of about ₹800 crore towards various payments to operationalise these mines will be incurred in this fiscal.

The mining investment excludes about ₹1,200 crore towards upfront payment that will be set-off / recovered from the premium payment to be made for the iron ore that will be extracted from these mines, said JSW Steel.

Published on May 22, 2020

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