JINDAL STEEL LIMITED
8,344words
95turns
11analyst exchanges
4executives
Management on call
Vishal Chandak
MOTILAL OSWAL FINANCIAL SERVICES
V. R. Sharma
MANAGING DIRECTOR – JINDAL STEEL & POWER
Ramkumar Ramaswamy
CHIEF FINANCIAL
Nishant Baranwal
HEAD IR - JINDAL STEEL & POWER
Key numbers — 40 extracted
1.99 million
ed June 30, 2022. Let us start with the production volumes. Our production during the quarter was 1.99 million tons; this is lower over the previous quarter by around 6%. The primary drivers for this was one
6%
ction during the quarter was 1.99 million tons; this is lower over the previous quarter by around 6%. The primary drivers for this was one at our Raigarh plant there was a maintenance shutdown in ou
1.74 million
to thermal coal unavailability. I will talk about sales. Our sales volume during the quarter was 1.74 million tons of steel sales this was lower by around 16% over the previous quarter. As you know this quar
16%
Our sales volume during the quarter was 1.74 million tons of steel sales this was lower by around 16% over the previous quarter. As you know this quarter we had challenging market conditions, we star
12%
d export volumes have been impacted during the quarter. Our domestic volumes were lower by around 12% and our export volumes were lower by around 28% during the quarter. In terms of r
28%
uarter. Our domestic volumes were lower by around 12% and our export volumes were lower by around 28% during the quarter. In terms of realization, our realizations were higher by around
15%
lizations in June and we see that continuing in July as well. We see a softening to the extent of 15%, 16% in terms of realizations in June and July. In terms of our cost our costs have gone up by ar
10%
in terms of realizations in June and July. In terms of our cost our costs have gone up by around 10% primarily driven by coking coal cost increase of around 33% and the thermal coal cost increase of
33%
cost our costs have gone up by around 10% primarily driven by coking coal cost increase of around 33% and the thermal coal cost increase of around 27%. As many of you would know we are seeing a softe
27%
ly driven by coking coal cost increase of around 33% and the thermal coal cost increase of around 27%. As many of you would know we are seeing a softening of prices currently for all of these and we
14561 Crore
will now quickly move on to our gross total income. Our gross total income during the quarter was 14561 Crores was declined by around 7% over the previous quarter for the reasons that I just detailed in term
7%
s total income. Our gross total income during the quarter was 14561 Crores was declined by around 7% over the previous quarter for the reasons that I just detailed in terms of volume decline offset
Guidance — 20 items
“This time to be able to take more question and answers and give ample time for it, we decided to dive straight into the financial commentary which will be given by our CFO, Mr.”
“As many of you would know we are seeing a softening of prices currently for all of these and we expect the benefit of this to flow through in the subsequent quarters.”
“A quick update on our credit rating, our credit rating stands unchanged at AA- and with strong financial performances we expect that there would be improvements in credit rating.”
“So first of all we are not taking any long maintenance shutdowns, so rather we are going for the intermittent shutdowns whenever it is required, so of course there is a shortage of thermal coal but we are now importing thermal coal and hopefully in next one week or 10 days time the situation will be normalized, so our intention is not to reduce the production.”
“We have a target of 8.2-8.4 million ton in this particular financial year and our aim is same we will be producing more than 8.2 million ton in the current financial year.”
“No longer shutdowns but in case there is some breakdown which is unavoidable like it has happened about two months back so that is the issue sometimes it happens, but otherwise there is no planned shutdown till next year March 31, 2023.”
“The second one is essentially on the coking coal price and thermal coal price movement over next quarter Q-o-Q if you can give in dollar terms that would be great?”
“As I said the net debt for the quarter was 7413 Crores, we had a structured long-term repayment of around 400 Crores and the rest of it was more reduction in our short-term debt, we continue to hold cash in our balance sheet of roughly around 3000 plus Crores and we will be on an ongoing basis evaluating options to repay, options to prepay and options to hold cash.”
“Ramkumar Ramaswamy :On the working capital buildup I think we did have a working capital buildup during the quarter primarily because of the export duty being imposed and therefore there was a softening in terms of customer demand so we did not have a working capital buildup maybe I do not have the exact number but it will be safe to say that it will be upwards of around 2500 to 3000 Crores I think that was a kind of working capital buildup that we had.”
“I think as you said that the market is quite volatile and challenging much as we would like to provide some guidance I think we would like to avoid providing any forward looking guidance on this whatever is the market prices that are going to be there we will try and make sure that we are able to sell our products at those prices or at slightly higher prices to reflect the premium that we have but currently we do not want to provide any forward looking guidance on our realization.”
Risks & concerns — 8 flagged
Our gross total income during the quarter was 14561 Crores was declined by around 7% over the previous quarter for the reasons that I just detailed in terms of volume decline offset by higher realization.
— Nishant Baranwal
It is very difficult to predict today’s market because the world is melting down we do not know where the world will settle.
— V R Sharma
Joe Biden is visiting Saudi Arabia I think there is discussion about more oil or more gas this may give a respite to the world, but today the whole world entire world is uncertain.
— V R Sharma
I think as you said that the market is quite volatile and challenging much as we would like to provide some guidance I think we would like to avoid providing any forward looking guidance on this whatever is the market prices that are going to be there we will try and make sure that we are able to sell our products at those prices or at slightly higher prices to reflect the premium that we have but currently we do not want to provide any forward looking guidance on our realization.
— V R Sharma
Chinese rebar prices have come to a new low one-and-a-half year low this week and our domestic rebar prices are still at a significant premium of the Chinese prices, so given the fact that coking coal prices are falling now and the demand is going to be seasonally weak did you expect the rebar prices to come up from these levels?
— Rajesh Majumdar
Two questions first given that we are in volatile time so is there any change in our capex in terms of your project timelines or we stick to our capex plan and with that what has been the capex in first quarter and what could we envisage for the year as a whole?
— Indrajit Agarwal
Very good question, first of all I will tell you there is no volatile time, volatile time is when you produce something which cannot be sold.
— V R Sharma
We will be doing about more than 20% of the total produce through exports, but I cannot give the breakup that what will be, how much quantity will be beams, channels, angles, or specialty rounds or the alloy steel rounds or the plates so that is very difficult to tell today.
— V R Sharma
Q&A — 11 exchanges
Q
Good evening everyone and thanks for the opportunity. Congratulations for good performance. I have two questions the first one is essentially on your maintenance plans for this quarter, so what kind of maintenance plans you have for this quarter both at Angul and Raigarh and particularly thermal coal availability and prices both are high so can we see some kind of intermittent shutdown at your DRI plant so that is the first question I have?
V R Sharma
Thank you very much. I am V. R. Sharma, Managing Director. So first of all we are not taking any long maintenance shutdowns, so rather we are going for the intermittent shutdowns whenever it is required, so of course there is a shortage of thermal coal but we are now importing thermal coal and hopefully in next one week or 10 days time the situation will be normalized, so our intention is not to reduce the production. We have a target of 8.2-8.4 million ton in this particular financial year and our aim is same we will be producing more than 8.2 million ton in the current financial year. No lon
Q
Good evening and thank you for the opportunity. My first question is on the net debt movement. So this quarter our debt has reduced by around 1100 odd Crores against our cash profit of around 2000 odd Crores and also the JPL equity infusion of around 3000 odd Crores so is it possible to walk us through the net debt movement during this quarter? Ramkumar Ramaswamy :Thank you for the question. As I said the net debt for the quarter was 7413 Crores, we had a structured long-term repayment of around 400 Crores and the rest of it was more reduction in our short-term debt, we continue to hold cash i
Sumangal Nevatia
Sir I am looking for some specific details as to what was the working capital buildup during the quarter and capex and also what was the tax outgo with respect to the duty and divestment? Ramkumar Ramaswamy :On the working capital buildup I think we did have a working capital buildup during the quarter primarily because of the export duty being imposed and therefore there was a softening in terms of customer demand so we did not have a working capital buildup maybe I do not have the exact number but it will be safe to say that it will be upwards of around 2500 to 3000 Crores I think that was a
Q
Thanks for taking my question. On the raw material side how well are we integrated right now on our coking coal requirements and how is it likely in the next say one or two years?
V R Sharma
So raw material side we are very much comfortable and we are not foreseeing any problem. We have adequate quantity in pipeline as far as the coking coal is concerned or the PCI coal is concerned and the other point is iron ore is not in short supply as you know that government of India has banned outside export they have imposed very heavy export duty on iron ore and pellets so there is a flexibility now and the iron ore and pellets are available in abundance so there is no shortage of minerals in the country as of today. So we are thankful to government of India for imposing such kind of duti
Q
Good afternoon. Sir, I had a question on the recent reports of price hikes being taken in rebar so could you just confirm whether these are true and what is the actual quantum of price hikes that were taken?
V R Sharma
You see I think the primary steel mills not increased the prices primary steel mills are playing in a band of Rs.1000, Rs.1500 here and there, but yes price hikes we were seeing in the secondary steel market the reason being this is what I observed there are two reasons one is the scrap prices all of a sudden in 15- 20 days’ time moved from $380 C&F to $470 C&F in India so I think that was an impact at that time. The other is many of the sponge iron plants they were closed or they are not functioning properly because of shortage of coal so that was the major reason, but I think major primary n
Q
Thanks for taking my call Sir. I had a question on the rebar prices as well. Chinese rebar prices have come to a new low one-and-a-half year low this week and our domestic rebar prices are still at a significant premium of the Chinese prices, so given the fact that coking coal prices are falling now and the demand is going to be seasonally weak did you expect the rebar prices to come up from these levels?
V R Sharma
You see India was never importing rebars in the country but yes we are not insulated from the international scenario whenever the rebar prices go down that means immediately the iron ore and coking coal prices also go down, that is a sort of indirect index. The other is whenever the rebar prices or the commodity prices go down that means the scrap prices will also go down. So there is a community factor of scrap, iron ore, coal, coking coal, all these commodities put together they decide the prices but the reduction in the rebar prices in China is not because of anything else but because with
Q
Hi good evening thank you for the opportunity. Two questions first given that we are in volatile time so is there any change in our capex in terms of your project timelines or we stick to our capex plan and with that what has been the capex in first quarter and what could we envisage for the year as a whole?
V R Sharma
Very good question, first of all I will tell you there is no volatile time, volatile time is when you produce something which cannot be sold. The volatility in terms of prices going down one-sidedly it is not volatile because prices are not going up like for example the coking coal prices if you see it has gone up to $670 came down to $550 came down to $380 and then again went up to $520 that was volatility but today what we are seeing if you see the graph and the index also for the last three weeks continuously the coking coal prices are falling and continuously the iron ore prices are fallin
Q
Good evening everyone, thanks for the opportunity. My question was in terms of capex which we are doing for operational of our coal blocks so when can we expect the production from coal blocks coming in and is it possible if you can guide that in FY2023 how much captive thermal coal we can generate from our coal blocks which we won?
V R Sharma
I will tell you we are planning that before March 31, 2023 we will be in a position to open at least one mine so we have four mines so all of the four mines will be open. Any volume numbers which you can give for FY2023? The clearances are in place, most of the rehabilitation work is already done and I think maybe some Rs.50 to Rs.100 Crores this time for first opening of the mine and some of the equipment, machinery and all these things, so I think by March we should open one mine and another big amount maybe Rs.100 Crores not more than that. Which mine we can open by March? This will be in O
Q
Good evening Sir. I just wanted to understand have we taken any inventory write downs in this quarter because after May the export duty intimation would have bring down the overall value of the inventory significantly?
V R Sharma
No we have not kept anything at hold, we had paid about 113 Crores of duty that is export duty and we clear all the inventory outlays and what are the other products and after that we are working on a very, very structured business that is making goods only those goods where exactly value addition where we can recover major part of the export duty this is one. Secondly our first purpose is to meet out the domestic demand and whatever is not salable in India that much of quantity to export, but there are no inventories now. This question I had from the stock adjustment which was roughly about 1
Q
Thanks for the opportunity Sir. One on the part of like for the gap between consolidated EBITDA and standalone EBITDA it is around 300 odd Crores and the question is specifically for the CFO and why such a big gap like 300 odd Crores because it has not been there for the last 8, 12 quarters so why such a big gap why consolidated EBITDA is lesser by 300 odd Crores compared to the standalone EBITDA? Ramkumar Ramaswamy :This is clearly in your intercompany transaction eliminations in compliance with the accounting standards.
Kamlesh Bagmar
Just harping on that number so like we would have done roughly around 2000 odd Crores of cash profit in this quarter and on top of that we had roughly around 3000 odd Crores from the sale of JPL so cumulative both around 5000 odd Crores and even if we do a capex of 1000 Crores which we have not yet quantified so the debt is down hardly around 1100 odd Crores so where is the gap on that part and like on the side of working capital and even in the last quarter we had working capital? Ramkumar Ramaswamy :I think this question came up earlier as well and I said that our working capital during the
Q
Thank you Sir for giving me this opportunity. I have a couple of followup questions. First followup question is on the project finance term sheet for 15000 Crores that you have signed on the balance sheet of I think the Odisha subsidiary I do understand that you do not have a plan to leverage it but I wanted to understand the covenants of it what kind of capital expenditure is allowed to be financed under that loan and also what kind of capital expenditure cannot to be financed under that loan because it is a project finance loan and related to that the another question was why it has been tak
Kirtan Mehta
Apart from this current capex which has been for around 18000 Crores only that can be financed and if you are planning to add any of these secondary expansions to that project can that also be financed under the same loan because we do not really plan to draw down either this year or the next the way I understand it you plan to actually do it from your own pocket or whatever the cash flow is afforded by the company, so in that scenario are you aiming to sort of use this project loan for the further capital expenditure that you would be doing after completion of these projects and all? Ramkumar
Q
Thanks Rutuja. Thank you everyone for joining for this conference call and I will once again thank the management for this opportunity. I would hand over this floor to Nishant for closing remarks. Over to you!
Nishant Baranwal
We would like to thank both Motilal Oswal, Vishal as well as the operator and all of you for joining the call. Thanks a lot for your support as always. Have a great day. Thank you very much. Wish you all the best and let us pray to God that all this international geopolitical issue should be resolved as much as possible to avoid the meltdown of economy worldwide so let us hope for a good future tomorrow. Thank you. Thank you everyone.
Opening remarks
Vishal Chandak
Thank you very much Rutuja. Good evening ladies and gentlemen and welcome to the first quarter FY2023 Earnings Call of Jindal Steel & Power. I would like to thank the management of JSPL for giving us the opportunity to host the call for this quarter. We have with us the senior management from JSPL comprising Mr. V R Sharma, the Managing Director; Mr. Ramkumar Ramaswamy, the CFO; and Mr. Nishant Baranwal – Heading the IR. I would hand over the floor to Mr. Nishant for his remarks. Over to you Sir!
Nishant Baranwal
Thanks Vishal, thanks Rutuja. Good day everyone. We are pleased to welcome you all to this conference call to discuss our first quarter FY2023 Financial Results. First of all I would like to apologize for the delay. Since there was a delay in publishing our results we thought it is better that we give a few minutes before starting the call so that everybody can go through it. This time to be able to take more question and answers and give ample time for it, we decided to dive straight into the financial commentary which will be given by our CFO, Mr. Ramkumar Ramaswamy and thereafter we will take the Q&A and the entire management including our MD, Mr. V. R. Sharma, and our CFO, Mr. Ramkumar Ramaswamy are there for that. Over to you our CFO! Ramkumar Ramaswamy: Thank you Nishant. Good day and good evening everyone. I would like to take you through the details of the financial performance of JSPL for the quarter ended June 30, 2022. Let us start with the production volumes. Our production
Nishant Baranwal
Thank you Sir! Now we will dive straight into the Q&A. As always we request all of you kindly ask more strategic questions, we and IR team including myself, Rajesh and Gourav are always there to give you the data points. With that I probably hand over to the operator.