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JSW Steel cuts FY20 guidance as sales, production drop: Key Q2 takeaways

Planned shutdown and a sharp correction in steel prices hurt revenues which fell 21 per cent YoY to Rs 15,520 crore for the quarter.

ETMarkets.com|
Oct 23, 2019, 04.31 PM IST
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Steel-2---reuters
MUMBAI: JSW Steel posted a 29.6 per cent year-on-year (YoY) rise in net profit at Rs 2,917 crore for the September quarter against Rs Rs 2,251 crore profit reported in the same quarter last year.

Planned shutdown and a sharp correction in steel prices hurt revenues which fell 21 per cent YoY to Rs 15,520 crore for the quarter. Sales realisation and sales volume too declined.

Here are the key takeaways of JSW Steel's Q2 earnings:

Steel production drops
Crude steel production during the quarter stood at 3.84 million tonnes, down 8 per cent YoY. The current quarter performance was marked by a confluence of multiple headwinds – prolonged and severe monsoon impacting/logistics at Dolvi works, weak demand environment, sustained tight liquidity condition, planned shutdowns and sharp price correction.

Steel sales decline
Saleable steel sales dropped 9 per cent from a year before to 3.60 million tones, as weaker activity levels on the back of muted investment spend, credit squeeze, and a slowdown in the automotive sector resulted in overall subdued steel demand.

Guidance cut
The company expects to achieve 97 per cent of its crude steel production and saleable steel sales guidance of FY20, as production and sales volumes dropped in the first half of the year.

Impact on margins
Margins were adversely impacted by lagged pricing impact of certain key raw materials such as coking coal. The benefit of subsequent correction in raw material prices will flow through in the subsequent quarter.
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