India: JSW Steel key takeaways of Q1FY22

India’s steel major JSW Steel announced its Q1FY22 today. Major highlights of the investor’s conference call are mentioned below:

1.Crude steel production decline by 2% in Q1: JSW Steel has recorded standalone crude steel production of 4.10 mn t in Q1FY’22, down 2% as against 4.19 mn t in Q4FY’21. Along with this, flat steel production stood at 2.94 mn t and long steel production stood at 0.96 mn t in Q1.

2.Average capacity utilization: The capacity utilization rate stood at 91% in Q1, down 2% q-o-q, due to the diversion of liquid oxygen for medical use during the second wave of Covid. The company achieved an average capacity utilization level of ~93% in Q4 against 91% in Q3.

3.JSW’s steel sales plunge 11% in Q1FY’22: The company’s total sales stood at 3.61 mn t in Q1FY’22 as against 4.06 mn t in Q4FY’21, down by 11% q-o-q due to lower domestic demand amid the second wave of Covid-19, especially in the southern and western regions of the country. Sales of flat steel products were at 2.67 mn t, while long product sales stood at 0.84 mn t. JSW’s sales of semi-finished steel were recorded at 0.10 mn t in Q1 FY’22.

4.Export volume reported increase q-o-q: The company reported a sharp increase in its export volumes by 16% to offset the fall in domestic demand due to the second wave of Covid-19

5.JSW achieves highest-ever EBIDTA in Q1FY’22: The company has posted the highest-ever operating EBIDTA at INR 9,491 crore in Q1FY’22 as against INR 1,429 crore in the corresponding period last year, as per company reports. Higher realizations in the export and domestic markets and an enriched product mix have resulted in a better quarterly EBIDTA. High steel prices have helped to offset the surge in iron ore and coking coal prices.
 
6.JSW steel coated products performance: During the quarter JSW Steel Coated Products (GI/GL + Tin) registered a production of 0.66 mn t and sales volumes stood at 0.70 mn t in Q1FY22 mn t.

7.Company’s automotive sales reported an increase: JSW Steel’s domestic automotive sales increased by ~5x y-o-y basis while domestic automotive production grew by ~3x y-o-y in the country

8.India: Snapshots of JSW Steel’s plant-wise project updates
a) Dolvi

• The company has been aiming to double steelmaking capacity from 5 mn t to 10 mn t/year. Likely to get operational from Sept’21.
• Coke dry quenching unit has been commissioned in Q1FY’22.
• Blast furnace and steel melt shop works are in progress.

b) Vijaynagar

• 5 mn t/year brownfield project to be completed by FY ’24.
• Commissioning of the second line at cold rolling mill (CRM-1) likely to be over by Q2FY’22.
• A color coating line (0.3 mn t/year) to be commissioned by Q2FY’22.
• 1.5 mn t/year coke oven battery will be commissioned in phases from Q3 FY’22

c) Vasind

• 0.25 mn t/year colour coating line commissioned in May ’21.
• 0.45 mn t/year galvanizing line to be commissioned in Q2 FY ’22.
• Continuous annealing line (CAL) of 0.5 mn t/year likely to be commissioned by Mar ’22.

9.Inventory buildup: The company has accumulated its inventory of around 1,20,000 t of HRC at the port and was ready for shipments. But due to port congestion, resulted in increase in inventory. Also, the company has kept small volumes of inventory on hold in case domestic demand rebounds. Thus the company has built its inventory levels consciously

10.Domestic prices correction: Accumulation of inventory in the system and weak demand in Q1 resulted in price correction in the domestic market. However, the situation will stabilize and inventory will come down gradually because mills will be exploring export opportunities in the near term. However domestic HRC prices are still at a discount of around 15-20% as compared to HRC imports from major exporting nations.

11.Net sales realizations: Net sales realizations increased by 19% q-o-q driven by higher realizations from export and domestic markets and further enhanced by favourable product mix.

 Outlook-The company is expecting that its Dolvi expansion will be complete by next quarter. Also, demand in construction and infrastructure activities may gain momentum in H2FY22 while accelerated vaccinated drive will improve business sentiment in the near term.