India: JSW Steel’s major highlights for FY’21

India’s steel major JSW Steel announced its yearly results on May 21’21. Major highlights of the investor’s conference call are mentioned below:

1.Operational results

• Shortfall in crude steel production: The company saw a shortfall in meeting its annual crude steel production by 6% to 15.08 million tonnes (mn t) in FY’21 compared to 16.06 mn t in the last fiscal. Flat steel products accounted for 10.87 mn t, down 4% y-o-y. Long steel products aggregated 3.21 mn t, down 14% y-o-y.
• Average capacity utilization in FY’21: The average capacity utilisation was at 84% in FY’21. The company achieved an average capacity utilisation level of ~93% in Q4 against 91% in Q3. In Q1, the same stood at 66% due to the nationwide lockdown, disrupted supply chains, and a steep drop in demand.
• Operating EBITDA increased 35%: The company’s EBITDA stood at INR 19,259 crore in FY’21, up 35% against INR 12,517 crore in the previous fiscal. JSW Steel, in Q4, recorded an operating EBITDA of INR 8,021 crore against INR 5,633 crore in Q3FY21
• Company on track to meeting annual sales guidance: JSW Steel is targeting a consolidated crude steel output of 22.94 mn t and sales of 21.63 mn t in FY’22. Meanwhile, from a standalone perspective, the company is aiming to churn out 18.50 mn t of crude steel and achieve sales of about 17.40 mn t in the current fiscal, SteelMint learned from the investors’ conference call.
• JSW coated steel performance in FY’21: JSW Steel Coated Products registered a production of 1.79 mn t and a sales volume of 2.18 mn t in FY’21.

2. Domestic and export sales

• Decrease in domestic sales: Domestic sales were at 10.72 mn t, down by 9% in FY21 mainly due to a slump in domestic demand in Q1FY’21.Domestic sales were at 3.03 mn t, following strong demand uptick in Q3 and destocking during Q4.
• Value-added and auto sales: Overall, value-added & special products sales were up 9% in FY21,mainly driven by robust sales to the automotive sector and increased offtake from industrial and engineering, solar, and appliances segments in H2FY21.
• Net sales realisation: Net sales realisation increased by 19% q-o-q and increased 39% y-o-y, driven by higher steel prices, and a favorable geographical and product mix.
• Export volumes increased in FY’21: JSW Steel’s total steel exports stood at 1.03 mn t in Q4 FY’21, up 124% yearly and around 120% q-o-q, mainly due to a slump in domestic demand, SteelMint notes. Also, strong demand for value-added and special products on the back of a global economic recovery resulted in increased exports.

3. Expansion plans

• Dolvi expansion plan pushed to Q3 CY’21: JSW Steel had earlier announced doubling of the steelmaking capacity of its Dolvi plant in Maharashtra from 5 mn t to 10 mn t per annum by mid-2021. However, expansion work of the blast furnace and steel melting shop (SMS) has been impacted by the ongoing Covid disruption. Thus, full integrated operations are now expected to commence from around 1 Oct ’21, against the earlier planned 1 July’21, SteelMint learned at JSW’s investor’s call.
• JSW to boost Bhushan Power and Steel’s capacity to 3-3.5 mn t/year: JSW Steel acquired Bhushan Power and Steel (BPSL) in Mar’21. The Odisha-based company has a liquid steel capacity of over 2.5 mn t per annum, producing mainly flat steel at its Jharsuguda facility. JSW is planning to expand BPSL’s capacity to 3-3.5 mn t, which is expected to be commissioned within the next 12 to 18 months.
• Plans to increase coke oven capacity at Vijaynagar plant: JSW Steel plans to increase the coke oven capacity from 1.5 mn t to 3 mn t and this is expected to be commissioned by Q3FY22
• Expansion of steelmaking capacity by 5 mtpa at Vijayanagar: Plans are afoot to increase steel-making capacity by 5 mtpa at Vijayanagar from the existing 12mtpa which is expected to be commissioned by FY2024
• Capacity expansion in Kalmeshwar: The plant commenced its production with the first coil in March 2021.Capacity enhancement of the PPGL unit to 0.22 mtpa commissioned in FY21
• Other major key acquisitions
  1.Asian Color Coated Ispat limited (ACCIL) with a capacity of 0.1 mn t per annum and production facilities in Maharashtra and Haryana.
  2.Bhushan Power and Steel Limited (BPSL) having a total capacity of over 2.5 mn t/year in Odisha’s Jharusuguda which primarily produces flat steel products with downstream facilities in Kolkata and Chandigarh.
  3.Welspun Corp Ltd, which manufactures high-grade steel plates and coils. It is located in Anjar, a port-based facility in Gujarat, with a capacity of 1.2 mn t per annum.

4.Raw material and steel prices

• Domestic steel prices are still 15-20% lower than imports: Indian steel prices are currently at a discount of around 15-20% against the landed cost of imports to India. Thus, domestic steel prices have the potential to increase further, Importantly, the steel major has already hiked steel prices twice this month, as per SteelMint reports.
• All iron ore mines are operational: All 13 iron ore mines are operational which includes nine in Karnataka and four in Odisha. Also, the company is planning to enhance its own mining infrastructure to reduce reliance on outsourced mining.

Outlook
JSW Steel is expecting higher margins on the back of its Dolvi expansion plans, acquisitions made last fiscal and downstream capacities. The company is also expecting the next phase of growth to come from brownfield expansion at Vijayanagar. It aims to leverage its captive iron ore resources for higher efficiency.