JSW Steel Q4 Results: Profit Plunges 85% On Covid-19 Woes, Guidance Cut

JSW Steel’s net profit fell 84.8% year-on-year to Rs 231 crore in Q4 on the back of revenue that fell 20% to Rs 17,887 crore.

Steam rises from the JSW Steel Ltd. manufacturing facility stands in Dolvi, Maharashtra, India. (Photographer: Dhiraj Singh/Bloomberg)
Steam rises from the JSW Steel Ltd. manufacturing facility stands in Dolvi, Maharashtra, India. (Photographer: Dhiraj Singh/Bloomberg)

JSW Steel Ltd.’s quarterly profit tumbled as demand for the alloy fell amid disruptions caused by the coronavirus pandemic, and overseas subsidiaries continued to suffer losses.

Consolidated net profit of the steelmaker fell 85 percent year-on-year to Rs 231 crore in the quarter ended March, according to an exchange filing. A consensus of analysts tracked by Bloomberg had estimated the metric at Rs 738.78 crore.

Profit fell mainly on account of impairment provisions for its overseas investments. It set aside Rs 852 crore due to increased uncertainty about restarting its mining operations in Chile. Another Rs 80 crore was provisioned for the retirement of certain fixed assets in India.

JSW Steel’s operational performance was impacted due to lower realisation from its domestic business and losses sustained by its overseas arm, but was in line with Bloomberg consensus estimates.

  • Revenue fell 20 percent over last year to Rs 17,887 crore—lower than the estimated Rs 18,595 crore.
  • Operating profit declined 33 percent to Rs 2,975 crore.
  • Margin narrowed 320 basis points to 16.6 percent.
  • Exception loss of Rs 805 crore, including impairment provisions related to overseas arm.

Steel mills have been hit because of the government’s restriction on production and movement of people as it tries to prevent the virus’ spread. That deepened the slump in demand for the alloy as new construction and purchases of cars and houses were delayed, leading to a fall in prices.

JSW Steel’s crude steel production fell 5 percent year-on-year to 3.97 million tonnes. Sales fell even more. Total consolidated saleable steel sales declined 14 percent to 3.7 million during the quarter.

Shares of JSW Steel closed 2.2 percent lower at Rs 166.15 apiece on the National Stock Exchange.

Fundraising Plans

The company’s board of directors have approved raising as much as Rs 14,000 crore through:

  1. Non-convertible debentures for an amount not exceeding Rs 7,000 crore.
  2. Equity shares and/or convertible securities (other than warrants) for an amount not exceeding Rs 7,000 crore.

Higher Leverage

The company’s debt-to-Ebitda ratio rose to 4.5 times—higher than 3.71 times in December 2019 and its guidance of 3.75 times. The company said on a post-earnings call that the ratio is expected to remain at 4.5 times during FY21.

Capex Guidance

JSW Steel not only failed to meet its capex guidance for FY20, but it also slashed its guidance for FY21.

  • JSW Steel spent Rs 10, 200 crore compared with earmarked capex of Rs 11,000 crore.
  • In October 2019, JSW Steel revised its FY20 planned capex to Rs 11, 000 crore vs Rs 15,700 crore announced in May 2019
  • Reduces capex for FY21 to Rs 9,000 crore from earlier guidance of Rs 16,340 crore

Project Updates

  • Expansion of crude steel capacity at Dolvi plant in Maharashtra from 5 MTPA (million tonnes per annum) to 10 MTPA along with captive power plant and coke oven (Phase 2) likely to get delayed into the second half of FY21.
  • 8 MTPA pellet plant and wire rod mill at Vijayanagar in Karnataka expected to be commissioned in Q1 of FY21.
  • CRM1 complex capacity expansion at Vijayanagar from 0.85 MTPA to 1.8 MTPA expected to be commissioned progressively in Q2 and Q3 of FY21.
  • Downstream modernisation-cum-capacity enhancement projects at Tarapur expected to be commissioned in second half of FY21.