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.