JSW Steel – India’s largest steel producing company with an installed steel making capacity of 18 MnT pa announced its quarterly results for Q1FY19 today. The company reported 5% Y-o-Y increase in crude steel output and highest ever quarterly Net Profit After Tax.
Below are highlights of the conference call conducted:
1.Crude steel output up by 5% Y-o-Y in Q1FY19 – Company’s crude steel output registered growth of 5% to 4.11 MnT in Q1FY19 which was 3.91 MnT in Q1FY18.
2.Saleable steel sales increased 9% Y-o-Y- Company saleable steel sales registered growth of 9% on yearly basis to 3.83 MnT in Q1FY19 which was 3.51 MnT in Q1FY18.
3.Company’s EBITDA moved up significantly in Q1FY19 – Company’s EBITDA registered the tremendous growth of 119% on yearly basis to INR 4,822 cr as compared to INR 2,198 cr in similar time frame of previous year.
4.Company recorded highest ever quarterly net profit in Q1FY19- Company recorded highest ever quarterly net profit after tax which stood at INR 2,338 Cr higher by 458% on yearly basis against INR 419 Cr in Q1 FY18.
5.Increased spending on Govt.Infrastructure boosted demand in Q1- In India as government spending on infrastructure remains robust, the Gross Fixed Capital Formation (GFCF) rate continues to exhibit an increasing momentum. Vehicle production and consumer durable sales remain robust driven by high consumer demand. Rural demand momentum is likely to sustain on the back of higher disposable income from higher
6.Indian steel imports moved up by 15% Y-o-Y – Imports of steel into the country surged by 15% Y-o-Y and 31% Q-o-Q. As imports continue to increase and exports decline, India turned a net importer of steel in Q1 FY19. Imports from Korea and Japan increased by 31 % Y-o-Y and constituted 52% of total imports into the country.
7. Impact of US Tariffs- Post imposition of Section 232 by US and safeguard measures announced by the EU, JSW started witnessing diversion of steel imports from steel surplus countries into India. This necessitates imposition of effective trade remedial measures in a timely manner by the Government of India. Chinese steel exports to US have come down while on the other hand exports to India have seen an increase recently.
8.Acquisition of Monnet Ispat and Energy Limited: The resolution plan submitted by the consortium of JSW Steel Limited and AION Investments Private II Limited, for acquisition of Monnet Ispat and Energy Limited under the corporate insolvency resolution process has been approved by the Mumbai bench of the Hon’ble National Company Law Tribunal (NCLT)with certain modifications and the written order is awaited.However written order is still awaited.
Updates on Overseas Acquisitions are as follows:
a. Aferpi: The Company has concluded the acquisition of 100% shares of Aferpi S.p.A., Piombino Logistics S.p.A. and 69.27% of the share capital of GSILucchini S.p.A. in Italy. This 1.3 MnTPA rolling facility is expected to commence operations by the next quarter.
b. Acero junction Holdings Inc: The Company has completed the acquisition of 100% shareholding in Acero Junction Holdings Inc. at Ohio in USA. Thework to commence production is underway and the Company plans to start operations by Oct’18.
9.Rebar demand expected to pick up from October-Domestic rebar prices in secondary market witnessed decline in this quarter amid arrival of monsoons and weak construction activity.However we expect demand to pick up from the month of October owing to increased government spending on infrastructure projects like Bharatmala project etc.However in this quarter flat steel prices remain range bound and less likely to see any major deviation in near term.Meanwhile India witnessed significant growth of 9.2% Y-o-Y in domestic steel demand for the first quarter
10.Blended Coking coal cost remain stable against previous quarter-Blended coking coal stood at USD 205/MT CFR basis which was similar to previous quarters.However it is likely to remain stable in next quarter.
11.Impact of imposition of import Quotas by European Commission- Company has moderated the levels of steel exports Thus export ratio in Q1 FY19 was around 12% which was 23% in entire FY18. Imposition of quotas by EU has bought certainty in the market and company is selectively doing exports.
12.Conveyor belt to reduce iron ore transportation cost sharply at JSW Vijaynagar – JSW Steel’s (Vijayanagar) conveyor belt having capacity of around 20-22 MnT iron ore annually is expected to start operations by Sept or Oct’18. Initially in 1st month time the quantity is expected to be around 10-12 MnT which will be later increased to 20-22 MnT pa. This is likely to reduce iron ore transportation cost from about INR 450-500/MT to less than INR 100/MT.
13.JSW to actively participate in upcoming iron ore block auctions- JSW Steel will actively participate in upcoming iron ore block auctions scheduled in Karnataka. Around 7-8 iron ore mine blocks have been put under hammer by govt. for which procedures are already on.
14.Regarding iron ore sourcing pattern of JSW Steel – JSW Steel has been primarily sourcing iron ore from NMDC (C.G.), Karnataka iron ore e-auctions, Odisha mines and through imports.The company is opting for better utilization by making use of lower alumina content iron ore.
15.JSW Steel’s iron ore production from captive mines – The company has already started operations at its two mines with capacity of 0.7 MnT pa. The company is expected to start operations at its remaining three mines in this fiscal which will supply nearly 3.5 MnT iron ore annually.
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