JSW Steel reported an 86% drop in its consolidated net profit to ₹839 crore in the first quarter of the financial year 2022-23. The steelmaker had reported a consolidated net profit of ₹5,900 crore in the year-ago period.
The domestic steel industry was impacted by falling global prices and the imposition of a 15% duty on certain steel exports in May 2022 further exacerbated the situation with a steep quarter-on-quarter fall of 26% in exports, the company says in a regulatory filing.
The export duty on steel products is expected to be a temporary measure to contain inflation and may be removed once inflation cools down, says JSW Steel.
The company’s revenue from operations jumped 31.8% year-on-year to ₹38,086 crore as compared with ₹28,902 crore in the corresponding period last fiscal.
EBITDA margin for the quarter came in at 10.78% compared with 36% recorded in the same period a year.
During the first quarter of FY23, high inflation across major economies on the back of supply chain disruptions and the Russia-Ukraine conflict impacted the global economic outlook, the steelmaker says.
While India has been relatively resilient with economic activity recovering from the pandemic-induced slump, high inflation and policy rate tightening across the world have become formidable headwinds, it adds.
India steel consumption was at 27.36 million tonnes during Q1 FY23, down by 5.6% sequentially. Exports fell 26% to 2.88 million tonnes, due to weaker global demand and imposition of export duty.
Owing to volatile markets condition, JSW Steel preponed certain shutdowns that were scheduled during the year, which lowered the average capacity utilisation (excluding Dolvi Phase-II) for Q1FY23 to 93% from 98% in the preceding quarter.
The 5mtpa Dolvi Phase-II expansion continued to ramp up and will drive volume growth as demand recovers in the coming quarters, the company states.
JSW Steel’s capex spend during the quarter stood at ₹3,702 crore against the planned capex spend of ₹20,000 crore for FY23. Considering the current market conditions, the company expects to calibrate its capex spend to ₹15,000 crore for FY23.
“Inherent demand from auto and construction and infrastructure segments remain strong that should support overall steel consumption during FY23," JSW Steel says.
The steel producer cautions that the global economic outlook has weakened due to high inflation across most economies, with elevated energy and food prices affecting consumption. The ongoing Russia-Ukraine conflict and frequent Covid related lockdowns in China have disrupted global supply chains, and caused spikes in energy prices, it says.
JSW Steel is the flagship business of the $22-billion diversified JSW Group, which has its presence in sectors such as energy, infrastructure, cement, paints, sports and venture capital.
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