Steel Authority of India Ltd Q2 FY24 Earnings Conference Call Insights

Key highlights from Steel Authority of India Ltd (SAIL) Q2 FY24 Earnings Concall

• Financial Performance
  • SAIL registered best ever Q2 results in Q2 FY2024.
  • Crude steel production grew 12% and saleable steel production grew 17% in Q2 FY24.
  • Sales volume grew 13% domestically and total sales turnover grew 13% in Q2 FY24.
  • SAIL returned to profitability with PBT of INR1696 crore and PAT of INR1,241 crore in Q2 FY2024.
  • H1 FY2024 PBT grew over 250% vs last year to INR1898 crore.
• Outlook
  • Coking coal prices expected to moderate in Q4 FY2024 providing cost relief.
  • Domestic steel consumption outlook remains positive supporting better realizations.
  • Expecting benefits from rail price revision to boost revenues and profits.
  • Coking Coal Prices
  • Expect Q3 imported coal prices to average around INR27,000/tonne.
  • Around 15% of coking coal sourced domestically from BCCL at 12-15% discount to import price.
• Rail Price Revision Benefits
  • Booked INR1,750 crore in Q2 from FY22 rail price revision to INR85,300/tonne.
  • Currently getting provisional rail price of INR67,500/tonne for FY23 and FY24.
  • Will approach Railways for ad-hoc increase for FY23 and FY24 based on higher costs.
  • Expect additional gains in coming quarters once final FY23 rail price is determined.
  • Will submit FY23 costs to determine final rail price, expect it to exceed provisional price.
• Semis Sales
  • Semis share of sales now less than 15%.
  • Using external conversion services to convert semis to finished products.
  • Reduced overall semis share to just 8% of sales.
  • Conversion done mainly for long products like TMT bars and structures.
• Sales Realizations
  • Q2 flat product realization around INR55,000/tonne vs INR51,000 for long products.
  • In October, flat realization was Rs 57,000/tonne and long products Rs 54,000/tonne.
  • Current differential between flat and long products is Rs 3,000 – 4,000/tonne.
• Capex and Expansion Plans
  • Will start with greenfield expansion of IISCO Steel Plant.
  • Expect to get board approval for IISCO expansion by end of Q3FY24.
  • Asset sweating capex of Rs 15,000-20,000 crores over 4-5 years.
  • Will then go for brownfield expansions at Durgapur and Bokaro.
  • Phasing expansions over 3-4 years to avoid liquidity crisis.
  • Aim to maintain debt-equity ratio of 1:1 during expansion.
  • Asset sweating to increase capacity by 3.5 million tonnes over next 3 years
• Production Enhancement
  • Plan to sweat existing assets through debottlenecking.
  • Adding casters at Rourkela and Bhilai to increase capacity by 2 million tonnes.
  • Also setting up TMT bar mill at Durgapur to improve product mix.
  • Intermediate mining started at Rowghat, will help secure iron ore.
  • Targeting 3-4 years to get sufficient iron ore material from Rowghat.
• Volume Growth
  • Volume guidance for FY24 is 19 million tonnes of crude steel production.
  • Debottlenecking to help increase capacity by 2 million tonnes.
  • Debottlenecking to add 1 MT each in FY26 and FY27.
  • Sweating of assets to further increase capacity by 3.5 million tonnes.
  • Volume growth to come in phases starting FY25.
  • FY24 target is 19 MT crude steel production and 18-18.5 MT sales.
• Domestic Demand Trends
  • Seeing very good domestic demand, reduced inventory by 3 lakh tonnes since Q1.
  • Import pressure building up especially for flat products.
  • Overall imports still small compared to India’s steel production.
  • Expect imports to have some impact but not major.