JSW Steel Q2 PAT rises 22% to Rs 2,536 cr on one-time tax gain

Company cuts capex, production, sales guidance for FY20

Noting the weak demand scenario in the domestic market, Sajjan Jindal-led JSW Steel today slashed its capex as well as production and sales guidance for FY20.

At the September quarter earnings conference today, the company management said that it now expects to achieve 97 per cent of its crude steel production and saleable steel sales guidance of FY20, as both production and sales volumes dropped in the first half of the year.

The company had set a production guidance of 16.95 million tonnes for the current fiscal along with saleable steel sales guidance of 16 million tonnes.

"We have also identified certain projects in the capex category and have deferred Rs 4,700 crore worth of spends to the next year, taking into consideration the current market scenario. Hence our capex guidance stands cut at Rs 11,000 crore from previously announced Rs 15,708 crore," Seshagiri Rao, joint managing director and group chief financial officer told reporters in Mumbai today.

The company's peer Tata Steel is also likely to cut its capex by Rs 4,000 crore for FY20.

In the quarter ended September, JSW Steel reported a consolidated net profit of Rs 2,536 crore, up 21.51 percent from same period last year as the company wrote-back Rs 1,976 crore deferred tax. Its profit before tax, however, was dismal at Rs 688 crore in the quarter gone by, as against Rs 3,025 crore in the corresponding period last year. The fall was mainly due to a sharp decline in revenue, even as expenses declined, lending some support.

Meanwhile, the top line stood at Rs 15,520 crore in the period under review, down 18.5 per cent from same period last year as several factors, such as prolonged and severe monsoon, weak demand environment, correction in steel prices and tight liquidity conditions, impacted revenue streams.

"Realisations declined 16 per cent year-on-year as domestic steel prices fell sharply and were even lower than international prices," Rao said.

However, in order to partially mitigate the headwinds of weak demand, the company tactically focused on exports, which surged by 68 per cent and accounted for 31 per cent of consolidated saleable steel sales during the September quarter.

As per Bloomberg estimates, the consolidated revenue of the company was seen at Rs 17,906 crore, while the bottomline was expected to be at Rs 517 crore in the September quarter.

The company's EBITDA per tonne in the period under review stood at Rs 7,768 crore, as against Rs 12,118 crore in the same period last year. The operating EBITDA of the company stood at Rs 2,796 crore with an EBITDA margin of 18 per cent.

Pursuant to changes to the corporate tax rate, which has been reduced by 10 per cent, the company has made an assessment of the impact of the Taxation Law (Amendment) Ordinance 2019 and decided to continue with the existing tax structure until utilisation of accumulated minimum alternative tax (MAT) credit. Post utilisation of MAT, the company aims to migrate to the new tax regime at a future date, it said.

Separately, two of JSW Steel's subsidiaries, JSW Color Coated Products and JSW Industrial Gas, have opted to move to the new tax regime in FY20.

In the second half of FY20, the management sees demand picking up on the back of increased government spends. Overall, supportive fiscal and monetary measures are likely to spur investment and consumer demand over the medium term, it said.

As on September 30, the company's gross debt stood at Rs 49,640 core. "Comparing with (the actual) ratios with what we have been guiding, (we find that) we have headroom to borrow," Rao stated.

The company's net debt to EBITDA stands at 3.23 as against 3.75 earlier.