JSW Steel net slumps 58% to ₹1,008 cr on weak demand and lower prices

Our Bureau Mumbai | Updated on July 26, 2019 Published on July 26, 2019

(left)Seshagiri Rao, Jion MD & Group CFO, JSW Steel and Vinod Nowal, Deputy MD announcing company,s results in Mumbai on Friday. - SHASHI ASHIWAL

Inventory piles up as offtake from auto and infrastructure sectors dwindles

JSW Steel has reported a 58 per cent fall in its June quarter consolidated net profit at ₹1,008 crore against ₹2,399 crore largely due to weak demand and sharp fall in steel prices.

Gross sales were down three per cent at ₹19,407 crore (₹19,950 crore) despite higher production.

The company’s steel production was up three per cent at 4.24 million tonnes while sales dipped two per cent to 3.75 mt.

Inventory during the quarter was up by three lakh tonnes to 1.2 mt as the offtake by both automobile industry and infrastructure sectors dried up due to non-availability of credit. This apart, weak demand in global markets depressed prices and hit the profitability of the company.

However, the company expects the government to resume infrastructure spending and allocate money for key projects as envisaged in the Budget in tgis quarter.

Consolidated EBITDA in the quarter was down at ₹10,154 per tonne (₹10,302 per tonne).

Operating Ebitda was down 23 per cent to ₹3,726 crore due to lower sales volume.

On the brighter side, JSW Steel has emerged the highest bidder in three of the four operating iron ore mines put on auction in Karnataka and expects to source 35 per cent of its 2.5 mt of annual iron ore requirement from captive source. The three mines have reserves of 93 mt.

Of the six category 'C' iron ore mines acquired in last auction, the company has operationalised four and expects this to provide 1.2 mt of incremental supply. It will start mining in the other two mines by this quarter end to source 5 mt from captive source.

Seshagiri Rao, Joint Managing Director, JSW Steel, said the Karnataka government has done well to put the operational commercial iron ore mines in auction before their leases expire next March as per the Mining and Minerals Development Act so that there is no disruption in supply.

Eyes on auction

Another 45 iron ore mines are coming up for auction in Odisha and JSW Steel will actively participate in it to secure Salem (Tamil Nadu) and Dolvi (Maharashtra) plants requirement. Rao said of the overall planned capex of ₹48,000 crore, the company has allocated ₹1,000 crore for iron ore mine bidding.

Along with captive iron ore sourcing, the company has undertaken several cost saving projects including pipe conveyor mode to transport iron ore and cokeoven plant at Vijayanagar.

In fact, he said the company has already transported 2.60 lakh tonnes of iron ore through the conveyor pipe line resulting in transportation cost saving of ₹150 per tonne and 1 mt of coke which was imported last year will now be sourced captively.

Debt of the company was up at ₹47,766 crore but interest cost was down 12 basis points.

Shares of the company were up marginally by 0.36 per cent at ₹250 on Friday.




Published on July 26, 2019
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