Sajjan Jindal-led JSW Steel, which Friday reported a 48 per cent decline in consolidated net profit for the March 2019 quarter mainly on the back of higher cost of production and decline in realisations, has planned a capex of Rs 15,700 crore for the current fiscal.
The company, which had posted a consolidated net profit of Rs 2,879 crore in the year-ago quarter, has got an approval from the board for new capital expenditure (capex) proposals entailing a spend of Rs 5,700 crore over the next two years.
The company's consolidated total income during January-March period was Rs 22,421 crore as against Rs 21,381 crore a year ago.
The total expenses rose to Rs 20,058 crore from Rs 17,794 crore during the quarter ended March 2018.
The total income from operations and net profit for the entire fiscal increased to Rs 84,757 crore and Rs 7,524 crore, respectively, from Rs 73,211 crore and Rs 6,113 crore in 2019-18.
"For the current fiscal, we have planned a capex of Rs 15,700 crore. With the fresh approval of Rs 5,700 crore, we are now implementing a cumulative capex spend of Rs 48,715 crore (net of capex projects put on hold during the year) over FY18-FY21," the company's joint managing director and Group CFO Seshagiri Rao told reporters here.
He said the new approval of Rs 5,700 crore investment was mainly to be utilised for downstream investment for about Rs 1,000 crore, Rs 2,200 crore towards cost saving projects and Rs 2,000 crore for mining.
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"The funds will be utilised for completing the projects including the brownfield expansions undertaken by the company. These projects are planned to be funded by a mix of debt and internal accruals. Once we complete our expansion plans by 2020, the capacity will increase to 24 MT (million tonne per annum)," Rao added.
He further said the demand for steel declined during the fourth quarter mainly due to weakening demand from the auto sector, slowdown in the NBFC and non-availability of credit in the market. Also, the imports grew, while the exports have fallen which has caused pressure on steel prices.
Rao said the realisations have reduced nine per cent from the previous quarter ended December 2018, while it fell by two per cent on the year-on-year basis.
"Not only the steel prices were under pressure in fourth quarter, but the cost was also higher. The cost of production went up by 3 per cent which included power cost and higher electrode and refractory costs, part of which was offset by lower costs of raw materials like iron ore and coal, fuel efficiency and other initiatives" he said.
Rao further said that with an improvement in international demand and pricing of steel during the quarter, the company strategically shifted its focus to international markets in order to liquidate the accumulated stocks which were built at the end of the third quarter.
As a result, exports during the quarter increased sharply and exports accounted for 22 per cent of overall sale.
"After taking into consideration strong domestic demand conditions, and with a strategic intent of ensuring no volume loss for 2019-20, we have decided to defer the shutdown of BF-3 at Vijayanagar for upgradation (as part of Vijayanagar 12 MTPA to 13 MTPA expansion) to a later period after the new BF at Dolvi gets commissioned by March 2020 and starts ramping up.
"All other projects at Vijayanagar like SMS, caster and wire rod mill will continue to be completed as per original schedule of March 2020," he said.
Speaking about the guidance for the current fiscal, Rao said the company has set a target of increase in crude steel production and saleable steel sales to 16.95 million tonne and 16 million tonne, a rise of 1.5 per cent over 2018-19.
"With a stable government, previously announced outlays of Rs 1 trillion (Rs 1 lakh crore) in the interim Budget is expected to spur rural spending and aid overall consumer demand. Further, expectations of a normal monsoon bode well for the rural demand. As a result, we expect 6.5-7 per cent steel demand growth for FY20 in India," Rao said.
"Due to the growing restrictions, exports are falling. We hope the government will take measures to curb imports," Rao added.