JSW Steel, India’s second-largest private steel producer, on Friday reported a net loss of ₹582 crore in the June quarter—its first loss in over four years —with demand for steel dragged down by the coronavirus outbreak.
This is the first time since December 2015 that the Sajjan Jindal-led company has reported a net loss. The reported a profit of ₹1,008 crore in the year-ago quarter.
Year-on-year, revenue fell 41% from ₹19,407 crore to ₹11,454 crore. Steel production for the quarter fell to 2.8 million tonnes from 3.75 million tonnes last year. A correction in employee expenses, finance and fuel costs kept costs under control, bringing them down by 31%. However, operating losses at all three overseas subsidiaries pulled the consolidated numbers further into the red.
The company, however, performed marginally better than expectations. JSW Steel was expected to report revenue of ₹12,192 crore and net loss of ₹709 crore, according to a Bloomberg poll of six analysts.
“The first quarter was marked by formidable challenges of disrupted supply chains, unparalleled drop in demand and activity levels in the domestic markets, uncertainty in seamless inbound and outbound logistics movement, and liquidity constraints," a press release from the company said.
“The company undertook multiple initiatives to improve efficiencies by leveraging technological and digitalization tools, reducing fixed cost base, optimizing procurement costs, conserving liquidity, and ramping up sales and marketing efforts to find new markets and customers to remain competitive," it said.
Additionally, an outbreak of covid-19 was also reported at JSW’s primary steel plant Toranagallu Steel Works in Karnataka, affecting more than 500 workers, becoming an industrial cluster with a large number of covid-19 cases in the state.
As domestic demand was subdued, the company turned to export markets to liquidate inventory and generate cash flows, with exports accounting for 53% of total sales volume, a record high for the company.
Worryingly, JSW Steel’s consolidated net gearing (ratio of net debt to equity) stood at 1.54 at the end of the quarter as against 1.48 at the end of Q4 FY20 and net debt to earnings before interest, taxes, depreciation, amortization (Ebitda) rose to 5.74 as against 4.50 at the end of Q4 FY20.
Ebitda loss for the quarter was reported at all three overseas operations —US Plate and Pipe Mill ($11.4 million), JSW Steel Ohio ($12.54 million), and JSW Steel Italy (7 million euros).
During the quarter, JSW spent about ₹2,369 crore on capital expenditure, against a total revised spending plan of ₹9,000 crore for FY21. Project execution at all locations is ramping up slowly as the workforce availability is gradually improving, the company said.
The expansion of crude steel capacity at Dolvi Works from 5 to 10 million tonnes per annum along with the captive power plant and coke oven phase 2 is likely to be commissioned in the second half of FY21.
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