Release Date: July 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- JSW Steel Ltd (BOM:500228, Financial) reported a 7% year-over-year growth in sales, driven by strong domestic demand in India.
- The company achieved the highest ever share of value-added and special products during the quarter at 64%, growing 14% year-over-year.
- JSW Steel Ltd (BOM:500228) is committed to achieving net zero emissions by 2050 and has added significant renewable energy capacity.
- The company has commenced work towards expanding its capacity to 42 million tonnes in India, with a target of 50 million tonnes by the end of the decade.
- JSW Steel Ltd (BOM:500228) expects improved performance in Q2 due to lower raw material costs, including coking coal and iron ore.
Negative Points
- The company's crude steel production was down 1% year-over-year due to plant shutdowns.
- JSW Steel Ltd (BOM:500228) reported a 7% quarter-on-quarter decline in consolidated revenues from operations.
- The company's EBITDA was lower by 10% quarter-on-quarter, impacted by lower volumes and inventory losses.
- Overseas operations, particularly in the United States, faced challenges due to weaker market prices.
- The company is concerned about elevated steel imports from China and other FTA countries, which lack trade barriers in India.
Q & A Highlights
Q: How is JSW Steel addressing the issue of increasing imports from China and other countries?
A: Jayant Acharya, CEO, Joint Managing Director, Executive Director: We are in discussions with the government for trade remedial measures to address the high imports, especially from China and FTA countries. We are also focusing on cost reduction through strategic initiatives and expect steel prices to remain range-bound. Our focus remains on the domestic market, with exports limited to 10-15%.
Q: Can you provide details on your iron ore sourcing mix and the status of the coking coal mine in Mozambique?
A: Jayant Acharya, CEO, Joint Managing Director, Executive Director: Our Karnataka mines are ramping up, and we expect to operationalize new mines this year. Our captive iron ore is around 38-40%. For the Mozambique coking coal mine, we are awaiting government approvals and expect to start operations this year.
Q: What is the expected capacity and cost of production for the Mozambique coking coal mine?
A: Jayant Acharya, CEO, Joint Managing Director, Executive Director: The Mozambique mine has reserves of over 800 million tons and should produce around 20 million tons of clean coal. We will provide more details once we start mining operations.
Q: Why is JSW Steel transferring the slurry pipeline project to JSW Infrastructure?
A: Jayant Acharya, CEO, Joint Managing Director, Executive Director: The transfer allows us to focus on steel capacity expansion and prudent capital allocation. JSW Infrastructure, with its expertise in logistics, will manage the pipeline better. This decision aligns with our strategy to prioritize core steel business investments.
Q: What are the expected savings from the slurry pipeline project?
A: Jayant Acharya, CEO, Joint Managing Director, Executive Director: We expect to save around INR 900-1,000 per ton on iron ore transportation. The operational costs will be managed by JSW Infrastructure, and we will benefit from the reduced logistics costs.
Q: How does JSW Steel plan to handle the volatility in the US market, particularly in Ohio?
A: Jayant Acharya, CEO, Joint Managing Director, Executive Director: The Ohio operations have stabilized in terms of volume. We are focusing on improving the product mix and reducing commodity exposure. The performance will depend on the movement of steel prices in the US.
Q: What is the rationale behind the timing of the slurry pipeline transfer?
A: Jayant Acharya, CEO, Joint Managing Director, Executive Director: JSW Infrastructure is now better positioned to handle the project. The transfer allows us to redirect capital towards high-return steel expansion projects. The operational benefits will still accrue to JSW Steel.
Q: What is the expected impact of lower raw material costs on JSW Steel's margins in Q2?
A: Jayant Acharya, CEO, Joint Managing Director, Executive Director: We expect benefits from lower coking coal and iron ore prices, which will support margins. We also anticipate improved volumes from existing operations and new facilities coming online in Q2.
Q: What is the status of JSW Steel's captive iron ore mines?
A: Jayant Acharya, CEO, Joint Managing Director, Executive Director: Our Karnataka mines will reach 15.5 million tons this year, and Orissa will remain at 20 million tons. We also have mines in Goa and Maharashtra that will be operationalized soon, adding further capacity.
Q: How does JSW Steel plan to manage its net debt levels?
A: Swayam Saurabh, Chief Financial Officer - Designate: We aim to keep net debt to EBITDA below 3 and eventually closer to 2.5. While we are still in a CapEx cycle, we expect to manage our debt levels prudently through working capital optimization and strategic investments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
