Key highlights from JSW Steel Ltd (JSWSTEEL) Q3 FY24 Earnings Concall
- Steel Industry Trends
- Global crude steel production flat in 2023, decline in advanced economies.
- China’s steel production flat, but exports up 32% on weak domestic demand.
- India’s steel production up 12%, consumption up 12% in Q3FY24.
- Imports up in India, but should moderate with global prices nearing parity.
- Financial/Operational Performance
- Consolidated revenues at INR41,940 crore, EBITDA at INR7,180 crore.
- EBITDA per tonne at INR11,957.
- Record consolidated steel production at 6.87 million tons in Q3FY24, up 12% YoY.
- Consolidated sales volume at 6 million tons, down 5% QoQ.
- Institutional sales up 8% QoQ; share of value added products at 60%.
- Balance Sheet Position
- Net debt increased QoQ largely due to higher working capital and capex.
- Balance sheet remains healthy; net debt ratios remain range bound.
- Expect some deleveraging by FY24 end with working capital release.
- Will repay upcoming USD bonds from cash balances and internal accruals.
- Onshore funding currently more cost competitive.
- Will continue tapping onshore markets given lower costs.
- Raw Material Cost
- Coking coal costs increased $21/tonne in Q3, guided increase of $20-25/tonne in Q4.
- Iron ore costs increased in India due to higher exports and global prices.
- Enhancing captive mining limits to improve raw material security.
- Pricing Environment
- Global steel prices increased significantly across most regions.
- Domestic prices nearing import parity; expect recovery in Q4.
- Q4 to be supported by higher exports, better product mix.
- Growth Outlook
- Remain positive on India’s growth story and steel demand growth.
- Capex plans on track; spent INR13,249 crore in 9MFY24.
- External shocks like supply chain disruption or oil spike are key risks.
- Capex Spending
- Capex for FY23 revised down to INR 18,000 crores from INR 20,000 crores due to some project delays.
- Payments for some projects are spilling over into Q1 FY24.
- No major project cancellations, most expansions on track.
- Volume Growth
- BPSL expansion to add 1.5 million tonnes capacity by end of Q4 FY23.
- Vijayanagar expansion of 5 million tonnes to start contributing fully in FY24.
- Will provide volume guidance for FY24 during next earnings call.
- Future Capacity Expansion
- Brownfield expansion potential of ~15 million tonnes across Vijayanagar, Dolvi and Jharsuguda.
- At 10% demand growth, requires 5-6 million tonnes annually.
- Also planning 4 million tonne greenfield facility in western India.
- Target exceeding 50 million tonnes capacity by end of the decade.
- Outlook
- Global economy more resilient than expected in 2023.
- Inflation dropping across regions, rate cuts likely from mid-2024.
- India demand growth of 14-15 million tonnes estimated in 2023 over 2022.
- Total demand of 134-135 million tonnes likely by year end.
- 8-10% medium term growth expected to continue in India.
- Slurry Pipeline Project
- 90 kms of 300 kms pipeline laying completed.
- 125 kms welding completed.
- Secured land permits in Odisha section.
- On track for commissioning in 2026.
- Working Capital and Inventory
- Partially liquidating inventory build-up from Q3 in Q4.
- Will release some working capital to reduce debt.
- Stronger Q4 volumes will also improve working capital.