Jindal Steel and Power Ltd (JSPL) saw an improvement in steel consumption, with improved domestic demand and aims to achieve its FY23 production guidance of 8.2-8.4 mnt set earlier this year, SteelMint learnt from the company’s investor call held on 10 November that the company’s steel exports volume declined by around 36% q-o-q because of the 15% export duty imposed in late-May 2022.
Key highlights:
1. The company has seen robust domestic demand for steel and capacity utilisation is set to improve in the coming couple of years. Furthermore, the steel major expects demand to rise to 121 mnt in CY23, against 113 mnt in the year ago period.
2. Net sales realization (NSR) was down by 13% on the quarter. Out of which domestic realisations fell 9% and that from exports by a steeper 21% against the quarter ago period.
“In October, realisations were seen stabilising and are broadly around Q2 levels,” as per the conference call.
3. The company aims to reduce carbon emissions and achieve net zero by working on projects which will allow it to harness green hydrogen in the direct reduced iron (DRI) process, when it becomes commercially viable and the trials for it are carried out.
4. The company plans to make some captive coal mines operational by Q4FY23 and expects utilization to improve to 80-85% by FY25.
5. The total outlay of PLI scheme for the industry is around INR 6,300 crores and the incentive period is 5 years commencing from 2023-2024. The company has filed the application and is waiting for the next steps of the process.
6. A majority of the investments have been made and assets have been transferred under Jindal Steel Odisha, which is the 100% fully-owned subsidiary.
Other highlights:
Production falls q-o-q: JSPL’s production declined by 9% to 1.82 mnt in Q2FY23 as against 1.99 mnt in the previous quarter. The same dropped 6% y-o-y against 1.93 mnt in Q2FY22. Production volumes dropped due to maintenance shutdowns at Raigarh plant and Angul plant during the quarter.
Steel sales up q-o-q: Steel sales by JSPL stood at 2.01 mnt in Q2, up 16% q-o-q against 1.74 mnt in Q1FY23. However, the same fell 6% y-o-y as against 2.13 mnt in same period year ago.
EBITDA down q-o-q: The company’s adjusted EBITDA registered drop of 50% q-o-q to INR 1,426 crores in Q2FY23 as against INR 2,865 crore in the previous quarter. Higher volumes, lower cost and reduced realisations were among the prime reasons for the decline. The company had opening inventory which was sold at reduced prices during the quarter weighing on the margins. The differential in realization because of the opening inventory was around INR 600 crores (approximately INR 3,000/t)
Operational costs: The costs of steel melting shop (SMS) declined 8% q-o-q, primarily driven by a 6% (INR 800/t) reduction in coking coal, while iron ore prices slid by 24% (INR 3,000/t). Also, the price of thermal coal had fallen by around INR 600-700/t ($7-9/t) of steel in Q2 against Q1.
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