India’s leading steel mill – JSW Steel has announced its quarterly results for Q3 FY’21 and 9M FY’21.Company’s crude steel output was at 4.08 mn t up by 6% over 3.85 mn t in the previous quarter. Meanwhile saleable steel sales is lower by 5% to 3.90 mn t in Q3.
Major highlights of the investor’s conference call are mentioned below:
Operational results
1.Capacity utilization rebounded to 91% in Q3
The company achieved an average capacity utilization level of ~91% in Q3 against 86% in Q2. In Q1 the same stood at 66% due to the nationwide lockdown, disrupted supply chains and a steep drop in demand.
2.Operating EBITDA jumped three-fold
Company’s EBITDA stood at INR 5,633 Cr in Q3, increasing by 35% against INR 4176 Cr in the previous quarter. JSW has recorded the best quarterly operating EBITDA in Q3.
3.Company on track to meet its annual sales guidance
The company is on course to meet its annual guidance of 15 mn t of saleable steel sales. In 9M FY’21, the company has achieved 10.95 mn t and it now aims to achieve the balance of 4 mn t in Q4 FY’21. Meanwhile, the company’s production guidance achievement of 16 mn t will be 95% amid loss of 1.2 mn t in Q1FY21 due to iron ore shortage in India.
4.JSW coated steel performance in Q3 FY’21
During the quarter, JSW Steel Coated Products registered a production of 0.4 7 mn t and a sales volume of 0.61 mn t.
5.Reduction in inventory levels-
JSW reduced its inventories by around 0.47 lakh tonne in Q3 and around 4.73 lakh tonne during the 9M FY’21. Meanwhile in India inventory levels reduced by around 1.3 mn t in Q3 and around 3.2 mn t in 9M FY’21.
6.Dolvi expansion plan nearing completion-The expansion project at Dolvi from 5 mtpa to 10 mtpa steelmaking capacity is nearing completion, with the majority of operations to be commissioned in the current quarter. Fully integrated operations and stabilization will take place in Q1 FY’22. Company is facing some issues in its melting shop which is expected to be resolved by the first quarter of next financial year.
Domestic and export sales
7.Increase in domestic sales-
Company’s domestic sales stood at 3.48mn t in Q3 up 16% against 3mn t in the previous quarter. This is the second-best quarterly sales on record. Meanwhile the same went up by 13% y-o-y basis against 3.08 mn t in Q3 FY’20 on the back of a strong momentum in the domestic economy.
8.Net sales realization-
Net sales realization increased by ~20% q-o-q, driven by a revision in quarterly/ half-yearly contract pricing, a higher proportion of domestic sales and a favorable product mix. The same went up by 26% on a yearly basis.
9.Exports declined to 12% in Q3-
Company’s export volumes declined by around 12 % to around 0.47 mn t as the focus was on catering to domestic supplies. In Q2, the export volumes stood at around 28%.
Raw material prices
10.JSW expects Indian iron ore prices to cool down
Domestic iron ore prices in India are expected to cool down after witnessing a sharp hike in the last few quarters, highlighted JSW Steel’s senior management in today’s investor conference call. Prices in Odisha rallied by around 135% from INR 1,960/t to INR 4,600/t levels. With ramp-up in Odisha’s iron ore production, allotment of auctioned & non-operationalized mines to OMC and mining reforms, domestic iron ore availability is set to increase. This is likely to bring down domestic iron ore prices.
11.JSW’s 8 mn t pellet plant in Vijaynagar under commissioning
JSW Steel had earlier announced to set up 8 mnt pa pellet plant in Vijayanagar, Karnataka as a part of company’s cost savings project. In the latest update, we were informed that the pellet plant is under commissioning and heating is in progress. It is likely to be commissioned by the end of this month. Meanwhile, CRM-1 complex capacity expansion and one out of two continuous galvanizing lines (CGL) has been commissioned. The second will be commissioned by Q1 FY’22.
12.Commences production from all its captive iron ore mines
Company has operationalized another iron ore mine in Karnataka in Q3 FY’21, according to the company’s recent quarterly results release. With this, all the captive mines (9 in Karnataka and 4 in Odisha) became operational. Overall volume from captive mines constituted 49% of iron ore receipts of the company.
Auto contracts and sales
13.JSW Steel negotiating for quarterly auto contracts
JSW is negotiating quarterly contracts with auto majors, considering the volatility in the steel market. The revised quarterly auto contracts will be rolled out in Q4 FY’21 (Jan’21 – Mar’21) & Q1 FY’22 (Apr’21 – Jun’21) if the negotiation sails through. The move is expected to even out the burden faced by both the mills and auto majors due to a steep hike in the steel price.
14.Auto sales reported a jump in Q3
Automotive Steel sales increased by 57% y-o-y, while India’s domestic automotive production grew by 16% on a yearly basis. Overall Value added & Special products sales up 12% y-o-y (57% of overall sales),mainly driven by robust automotive sales and increased offtake from industrial and engineering, solar and appliances segments.
Outlook –
Domestic demand is expected to improve. JSW expects that Indian steel consumption will increase by at least 10% in FY’22. Thus, the company is planning for incremental capacities so that it is ready to fulfil the market demands as a ‘V’ shaped recovery is being witnessed.
Leave a Reply