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Sajjan Jindal-led JSW Steel reported lower-than-expected net profit of Rs 62.38 crore in the March quarter, down 87% from same period last year due to continuous influx of steel imports from neighbouring countries, lower exports and not-so-strong domestic demand.
The company’s revenues in the period under review stood at 12,364 crore, down 13% from the corresponding period last year.
As per Bloomberg estimates, the company was seen reporting a bottomline of Rs 180 crore in the period under review, while the topline was expected to be at Rs 12,471 crore.
The company’s bottomline was cushioned by the Rs 112 crore write back in the quarter gone by.
The company’s EBITDA/tonne was also a dismal as it fell to Rs 5,500 per tonne in the March quarter down from Rs 7,000 reported in the corresponding period last year.
“The cost of production for steel in the domestic market is higher than that overseas, rupee has depreciated less than other global currencies, imports are high and exports are not competitive. All this has reflected in the performance,” said Seshagiri Rao, joint managing director and group chief financial officer.
Though the company has tried to cushion its margins through efficiencies, the EBITDA margin during the quarter fell by five% on year-on-year basis due to falling steel prices amid stubbornly high cost of production.
On a standalone basis, the company took an impairment charge of Rs 105 crore on its investments in subsidiaries, which is considered exceptional in nature, said the company in the release.
Going ahead, the primary steel producer has planned a capex of Rs 9,000 crore for the next two years with brownfield expansion worth Rs 5,200 crore in the current fiscal and balance in the year after that.
“The capacity expansion will take the total capacity of the company to 18 million tonne in the next two years from 14.3 million tonne at present,”said Rao. “Under the capex planned, two million tonne will be added to Vijaynagar plant taking its total capacity to 12 million tonne, 0.25 million tonne at Salem in Tamil Nadu, 1.7 million at Dolvi and balance at tinplate unit,” he added.
Of the total Rs 9,000 crore capex, the company will be spending Rs 5,200 crore in the current financial year. Of this amount, Rs 1,700 crore will be via internal accruals and balance Rs 3,200 crore will be met via debt.
“We are yet to raise the debt with the banks for Rs 3,200 capex need,” he said.
As on March 31, the company has a consolidated net debt of Rs 35,800 crore. “Even if we are raising funds via debt, net-net there will not be much increase in the consolidated debt as Rs 2,900 crore will be repaid this year as against the Rs 3,200 crore which will be raised,”Rao explained.
Post expansion, JSW Steel plans to increase its contribution of value added products to 37% this fiscal from 33% in FY15.
