U.S., Chile Write-Offs Drive JSW to Record Quarterly Loss

  • Company reports impairment charges of 21.2 billion rupees
  • Indian steel industry suffers from rising imports, JSW says

JSW Steel Ltd., India’s third-biggest producer, swung to a record quarterly loss after a surge in cheap overseas supplies hurt product prices and the rout in commodities forced it to write down some assets overseas.

The group net loss was 9.23 billion rupees ($136 million) in the quarter to Dec. 31, compared with a profit of 3.3 billion rupees a year earlier, the company said on Friday. That compares with an average estimate for a 1.96 billion-rupee loss from 19 analyst forecasts compiled by Bloomberg. Net loss on a stand-alone basis was 41.4 billion rupees after the company set aside 55.96 billion rupees for diminution of investments, loans and advances in its U.S., Chilean and Netherlands units, it said.

Indian steelmakers, like their peers from South Korea to Europe, have been grappling with increased low-priced imports from China as demand in Asia’s top economy contracts for the first time in a generation. In India, producers such as JSW Steel are seeking further protectionist measures from the government in the annual budget next month on top of a safeguard tax and anti-dumping duties imposed last year.

“Global steel demand continues to weaken with lower investment activities and weak manufacturing across most regions,” JSW said in a statement. “Predatory prices of exports continue to intensify trade-remedial measures across most regions.”

Shares Tumble

Shares of JSW Steel fell 3.2 percent to 1,057.05 rupees in Mumbai on Friday. The stock gained 2.4 percent this month, after posting the first annual loss in four years in 2015.

JSW’s group net sales fell 33 percent to 86.2 billion rupees from a year earlier. In the quarter, total costs fell 27 percent to 85.8 billion rupees as raw material costs tumbled to 49.9 billion rupees from 75.5 billion rupees, according to the statement. On a group basis, JSW recorded impairment charges of 21.2 billion rupees, citing the rout in commodity prices.

The company’s net debt stood at 394.8 billion rupees at the end of December, JSW’s Chief Financial Officer Seshagiri Rao told reporters in Mumbai. China continues to dump steel into India at low prices, hurting domestic companies, he said.

Tax Effect

Imports of steel into India jumped 29 percent to 8.39 million tons in the nine months to December as local output declined 1.4 percent to 68.04 million tons, according to Steel Ministry data. The safeguard tax introduced in September and anti-dumping duty in December have failed to arrest the fall in steel prices, which are down about 23 percent to 34 percent year-on-year, Barclays Plc said in a note on Jan. 14.

India plans to impose further safeguards to aid its debt-laden steelmakers by levying a minimum price on imports and studying loan restructuring, Steel Secretary Aruna Sundararajan said last month. 

“Indian steel industry is grappling with headwinds of insipid demand, excess supply and pricing pressure driven by a surge in imports at predatory pricing,” JSW said. “This necessitates urgent and adequate measures to check unbridled and unfair imports of steel.”

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