Q1 Results: JSW Steel’s Profit More Than Halves, Misses Estimates
Net profit fell 56 percent year-on-year to Rs 1,028 crore for the April-June period.
JSW Steel Ltd.’s first-quarter profit more than halved as its operating margin dropped.
Net profit fell 56 percent year-on-year to Rs 1,028 crore in the June quarter, the Sajjan Jindal-led steelmaker said in an exchange filing. That’s lower than the Rs 1,150.3-crore consensus estimate of analysts tracked by Bloomberg.
JSW Steel Q1 Results 2019-20: Key Highlights (Y-o-Y)
- Revenue fell 3 percent to Rs 19,812 crore.
- Operating profit fell 27 percent to Rs 3,716 crore, in line with estimates.
- Operating margin narrowed 620 basis points to 18.7 percent.
The JSW Steel results come at a time when steelmakers are faced with twin headwinds of demand slowdown and surge in iron ore prices that have forced even ArcelorMittal, the world’s largest steel producer, to cut production.
Subdued Steel Demand
JSW Steel had earlier this month said it’s looking to cut costs and produce higher value-added steel to boost its profit and margin even as the company expects demand to slow till 2020.
The Mumbai-headquartered company had forecast domestic steel demand to fall to 7 percent in 2019 and 2020 compared with 7.5 percent in 2018 due to higher imports. It said global demand would suffer due to tapering of the U.S. policy stimulus.
Domestic steel demand in Q1 was impacted by weaker activity caused by lower public investment spend on account of general elections, lack of credit availability across the economy and slowdown in automotive and consumer durables, the company said in the exchange filing. “The subdued steel demand led to lower sales volumes and accumulation of inventory across the industry.”
The reduction in government spending has also impacted the steel industry, Seshagiri Rao, joint managing director and group chief financial officer of JSW Steel, said after the Q1 results announcement.
The steelmaker’s guidance for the year was 16 million tonnes. “But we are short up to now, on a proportionate basis by 2.5 lakh tonnes,” Rao told BloombergQuint, adding that the company should be able to make it up in the following three quarters. “We would like to approach it by the fact that the government expenditure, which has driven the steel demand last year through infrastructure spending, would get revived in the next quarter, if not in this quarter.”
“That should give us more opportunity for unwinding of inventory but to also maintain guidance for the year,” he said.
The company, in a separate filing, said it approved raising long-term funds by issuing non-convertible debentures of up to Rs 10,000 crore. The funds would be generated via private placement and/or public issuance in one or more tranches to replace short term loans and the proceeds would be used to meet JSW Steel’s working capital requirements,capital expenditure and general corporate purposes, it said.
On Friday, JSW Steel shares rose 0.36 percent to Rs 249.65 apiece on the BSE while the benchmark Sensex gained 0.14 percent to end the day at 37,882.79 points.
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