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May 17, 2024

JSW Steel Reports 64.5% Decline in Q4FY24 Net Profit Amid Revenue Dip and Tax Costs

JSW Steel, under the leadership of Sajjan Jindal, has reported a significant 64.5% drop in its net profit for the quarter ending March 2024 (Q4FY24) on a year-on-year (Y-o-Y) basis. The company’s net profit fell to Rs 1,299 crore, a sharp decline from Rs 3,664 crore reported in the same quarter last year. This decrease is attributed to reduced revenue, other income, and one-time tax costs.

Despite the challenging quarter, JSW Steel has projected a six per cent increase in production volumes for the current financial year (FY25), aiming for 28.40 million tonnes. The company also announced strategic changes, including the appointment of a new Chief Financial Officer and the acquisition of a significant coking coal mine in Mozambique.

Financial Performance

For Q4FY24, JSW Steel reported consolidated net sales of Rs 45,646 crore, a slight decrease of 1.5% Y-o-Y. Expenses for the quarter rose by three per cent, impacting the overall profitability. The company achieved a combined annual production of 26.68 million tonnes in FY24.

The quarterly performance at the standalone level included an impairment provision of Rs 1,279 crore for its US subsidiary and a reversal of a Rs 1,039 crore impairment provision related to its Netherlands division. Additionally, there was a tax impact of Rs 136 crore from earlier years at the consolidated level.

Market Expectations and Sequential Performance

JSW Steel’s net profit fell short of analysts’ expectations. A Bloomberg poll of 14 analysts had estimated a revenue of Rs 44,676 crore and 11 analysts had predicted a net income of Rs 1,661 crore. Sequentially, the company’s net profit fell by 46.2%, while net sales saw a 10.4% increase.

Strategic Decisions and Appointments

In a board meeting held on Friday, JSW Steel approved a fund-raising initiative of up to Rs 7,000 crore through Non-Convertible Debentures with warrants. These are convertible into or exchangeable with equity shares via a Qualified Institutions Placement. Additionally, the board recommended a final dividend of Rs 7.30 per share.

The company also announced the appointment of Swayam Saurabh as the new Chief Financial Officer (CFO Designate), effective June 1. He will succeed Rajeev Pai, who will transition to a new role within the organization.

Outlook and Capital Expenditure

Looking ahead to FY25, JSW Steel remains optimistic about the prospects in the housing, auto, and renewable sectors. The company expects a recovery in the rural economy, supported by forecasted above-normal monsoons in 2024, which should further drive economic growth. Despite rising geopolitical risks, India’s macroeconomic outlook remains strong, buoyed by robust foreign exchange reserves and positive capital inflows.

JSW Steel plans to increase its capital expenditure to Rs 20,000 crore in FY25, up from Rs 16,752 crore spent in FY24.

Industry Challenges and Acquisitions

JSW Steel highlighted the challenge posed by elevated steel imports, which surged by 37.4% Y-o-Y in FY24, particularly from China. This trend has been a significant concern for the domestic steel industry.

In a strategic move towards backward integration, JSW Steel announced the acquisition of a 92.19% equity stake in a coking coal mine in Mozambique. The mine boasts JORC reserves exceeding 800 million tonnes. The $73.75 million transaction is seen as a crucial step for JSW Steel in securing captive sources of coking coal, essential for steel production.

Conclusion

JSW Steel’s Q4FY24 results reflect the challenges of reduced revenue and increased tax costs, impacting net profit significantly. However, the company is poised for growth in FY25 with strategic investments and a positive market outlook. The acquisition of the Mozambique coking coal mine and the appointment of a new CFO are pivotal steps in strengthening its operational base and financial management.

Jhumpa Lahiri

Jhumpa Lahiri

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