JSW Steel posts Rs 582 crore consolidated net loss in Q1

The consolidated revenue from operations declined a sharp 40.5% year-on-year to Rs 11,782 crore.

JSW Steel on Friday reported a consolidated net loss of Rs 582 crore during the April-June quarter — its first quarterly loss in more than four years — mainly due to demand contraction due to the lockdown and the company slashing its output.  Still, the company’s net loss came lower than Bloomberg consensus estimates of Rs 709 crore. The company had posted a net profit of Rs 1,008 crore in the corresponding quarter last year.

“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,” the company said.

The consolidated revenue from operations declined a sharp 40.5% year-on-year to Rs 11,782 crore, missing Street estimates. Saleable steel sales for the quarter stood at 2.79 million tonne. The company enhanced exports to offset the loss of volumes in domestic market, liquidate inventory and improve cash flows. Export sales stood at 1.58 million tonne for the quarter, a record high, with domestic sales at 1.21 million tonne.

With the sharp decline in revenue, the Ebitda (earnings before interest, tax, depreciation and amortisation) fell a steep 64% y-o-y to Rs 1,341 crore, while the Ebitda margins collapsed 736 basis points to come in at just 11.4% versus 18.76% in the corresponding quarter.

Post the disruptions caused due to Covid-19, the company was able to commence operations across all locations towards the end of April 2020. “Since then, operations have gradually been ramped up, and for the months of May and June the company’s facilities operated at an average capacity utilisation of 80%,” the statement said.

During the quarter, the company spent about Rs 2,369 crore for capital expenditure, against a total planned capex spend of Rs 9,000 crore for FY21. The company had reduced the capex for FY21 from the earlier guidance of Rs 16,340 crore as it expects delays in ramping up of capacity at its different units. Covid-19 pandemic has also pushed the commissioning timelines of several ongoing expansion plans at JSW Steel. Non-availability of required manpower and material due to lockdown announced by the government and its subsequent extensions have severely constrained project activity at various sites, Sajjan Jindal, chairman and managing director JSW Steel had said in the company’s FY20 annual report.

Consequently, the expansion of crude steel capacity at Dolvi works from 5 MTPA to 10 MTPA along with the captive power plant and coke oven Phase 2 is now likely to get commissioned in the second half of FY21. The 8 MTPA pellet plant and the wire rod mill at Vijayanagar are expected to be commissioned in second quarter of FY21.

The CRM1 complex capacity expansion at Vijayanagar from 0.85 MTPA to 1.80 MTPA is expected to be commissioned progressively in second and third quarter of FY21. The downstream modernisation cum-capacity enhancement projects at Vasind and Tarapur and the colour coating line at Kalmeshwar are now expected to be commissioned in the second half of FY21.

The company’s consolidated net debt to equity stood at 1.54x at the end of the quarter as against 1.48x at the end of Q4FY20 and net debt to Ebitda stood at 5.74x as against 4.50x at the end of Q4FY20. Meanwhile, the JSW Steel’s board on Friday also approved raising of long-term funds of up to Rs 10,000 crore by way of private placement or public issuance in one or more tranches in the domestic market. The funds will be used to replace short-term maturity loans, meet long-term working capital requirements, capital expenditure, reimbursement of capex already incurred, and or for general corporate purposes.

In terms of the outlook, the company statement said, “In India, large pockets of activity/industries are heading towards gradual stabilisation. However, localised lockdowns driven by the resurgence of Covid-19 cases remains a key risk to sustain the pace of recovery”.