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JSW Steel slashes capex by Rs 4,700 crore on demand slowdow

JSW Steel had earlier planned to spend Rs 15,700 crore this year on various organic expansion programs.

, ET Bureau|
Oct 23, 2019, 07.33 PM IST
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Net debt at the end of the quarter stood at Rs 49,640 crore with a net debt to Ebitda ratio of 3.23x.
NEW DELHI: Amid a stretched slowdown in demand for steel that grew by less than 1 per cent in September, JSW Steel decided to "recalibrate" its capital expenditure for this year, bringing it down by Rs 4,700 crore and also reduced its annual production and sales guidance, the company's management announced at its September quarter earnings conference.

JSW Steel had earlier planned to spend Rs 15,700 crore this year on various organic expansion programs but will now be puting off expenditure on augmenting its downstream capacities and in other special projects to next year and will only be spending Rs 11,000 crore this year. The company also said that the volumes that it has lost in the first half of the year are "unlikely to be recouped during the second half" and hence will look forward to achieving only 97 per cent of its guidance for the year.

The company reported a 21.5 per cent rise in its net profit for the June-September quarter at Rs 2,536 crore as it was able to benefit from reversal of deferred tax provisions worth Rs 1,976 crore. The company had made these provisions earlier but re-visited them after the government announced the new corporate tax regime that JSW Steel plans to enter in future. Net profit before tax benefits stood at Rs 688 crore.

Net sales decreased by 18.5 per cent at Rs 17,572 crore due to lower sales volume and lower realisations that fell by 16 per cent owing to sharp fall in steel prices. Operating profit stood at Rs 2,731 crore, down by 44 per cent since last year.

The company's sales declined by 9 per cent during the quarter and it tried to makeup for the shortfall in domestic demand by pushing exports that increased by 68 per cent since last year during the quarter. Jayant Acharya, the company's chief for commercial and marketing said that it was able to reduce inventory by 48,000 tonnes since June.

Net debt at the end of the quarter stood at Rs 49,640 crore with a net debt to Ebitda ratio of 3.23x. "Comparing the relative ratios with what we have been guiding there is enough headroom for the company (to borrow more)," said Seshagiri Rao, joint MD at JSW Steel.

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