 "JSW Steel reports huge loss of Rs 923 cr in Q3")
Sajjan Jindal-led JSW Steel reported a net loss of Rs 923 crore in the December quarter as against a profit of Rs 328 crore in the corresponding period last year mainly because of the impairment charge the company took on its four strategic investments made overseas and also due to fall in sales.
Net sales of the company stood at Rs 8,621 crore in the period under review, down 33% from same period last year due to lower realisations and also a drop of 16% in sales volume on account of planned shutdown at three of the total seven blast furnaces of the company.
Contribution of export revenue was also lower at 12% from 29 per cent last year.
As per Bloomberg estimates, Mumbai-based JSW Steel’s net sales was seen at Rs 8,329 crore in the quarter gone and bottomline was expected to be a loss of Rs 60.14 crore.
“We had to review the overseas investments made between 2007-2010 since prices of crude oil, coal and iron ore have significantly fallen from the time of investment and as per the appointed external agency, an impairment charge had to be taken in the December quarter,” said Seshagiri Rao, managing director and group chief financial officer said at the earnings conference held here.
The company has taken an impairment hit of Rs 2,122 crore in the December quarter.
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A grim business climate led to JSW Steel reporting the lowest EBITDA per tonne since 2008 at Rs 3,443 per tonne in the December quarter which was also half of Rs 6,995 per tonne reported in the corresponding period last year.
“The reported EBITDA/per tonne was lower than what it should have been mainly because the planned shutdown had some fixed costs which had to be taken in the profit-and-loss statement, else the EBITDA per tonne (without fixed costs despite shutdown) would have been about Rs 4,700 per tonne,” Rao explained.
As the planned shutdown at company’s blast furnaces will see an extension by another two months, the management said its guidance in terms of production and sales for 2015-16 (Apr-Mar) will be hit by about 5-6%. JSW Steel had set a production target of 13.4 million tonne and volume sales target of 12.9 million tonne for the current financial year.
Noting the weak demand scenario for steel in coming months, the management said it will be reviewing the Rs 4,000 crore capital expenditure plans for FY17 sometime in May. “The planned capex was mainly for value addition and backward integration but we will have to take a relook and shall be doing that in May,” said Rao.
In the current financial year, the company plans to spend Rs 5,200 crore for capex and in the first nine months has already spent about Rs 4,000 crore.
As on December 31, JSW Steel’s net debt stood at Rs 39,483 crore.
Though the business environment remains challenging the company is hopeful that the government would take additional necessary steps to curb surging cheap imports which had been eating into the incremental domestic demand.
The domestic steel producers are looking for imposition of minimum import price on the entire value chain of steel products to curtail imports but this request has been facing stiff opposition from the consumer segment.
Regarding its overseas assets, the company said it has no plans to sell any of these mines or plants. JSW Steel has a pipes and plates unit in the US running at 10% and 20% capacity utilisation at present. Alongside, the company has iron ore mines in Chile and coal mines in Mozambique which are shut down due to falling prices.
The company said going ahead it will continue to make efforts to cut costs which will allow it to protect its margins to some extent. "There is scope for us to lower our conversion costs and we will also continue to have best and cheapest sourcing for iron ore and coking coal for our plants," informed Rao.