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JSPL Q1 hit by Chinese steel imports, says will explore asset sale to pare debt

JSPLJindal Steel & Power Ltd said it is in the middle various steps targeted at reducing debt, including exploring options such as sale of assets and listing of subsidiaries.

The company, which reported a decline in standalone EBITDA for Q1, said it sees market demand improve going forward and will increase its production of steel substantially during FY16.

The company is “in the midst of taking concrete steps to reduce its working capital and strengthen its financials by exploring various avenues to reduce its Debt.

“Sale of Non Core Assets and listing of subsidiaries are few of the options which the company is vigorously pursuing to reduce debt in FY16,” it said.

IMPROVEMENT EXPECTED

Jindal Steel & Power also said it expects the current financial year to be one of growth.

“The Indian economy is in need of a major growth push, which clearly has to be led by the steel Industry. Steel is critical for the growth of infrastructure, manufacturing and other core industries. ‘Make in India’ campaign would be a catalyst in this direction,” it said.

However, Domestic steel manufacturers continue to face pressure from falling steel prices due to Imports from China, Korea and other countries, it added.

“It is imperative that Government supports Indian Steel Manufacturers by initiating anti-dumping duties on these countries to make a level playing field – the sooner the better. The domestic industry is also grappling with far higher input, logistic and steep interest costs.”

On the availability of iron and coal, it said auctioning of Iron ore mines this year by Odisha Govt will further ease the availability of iron ore.

“We expect Iron ore prices to correct from here on. This will help JSPL to further reduce its manufacturing cost. Subject to favourable economic conditions, JSPL is targeting to produce over 5 million tonne steel during FY16, which would be about 50% higher than FY15.”

Jindal Power Ltd. would focus on higher plant loand factors this year, it said.

“Transmission of power to southern states has started to improve progressively during FY16. This will enable JPL to push more power to the southern states and utilize its existing PPAs fully.”

Overseas mining operations are gaining traction and with renewed focus on cost reduction in mining operations and logistic costs, they are expected to post better results in FY16, it added.

In parallel with efforts to augment production of both Steel and Power, JSPL will continue to focus on multiple cost reduction, energy saving and capital efficiency initiatives.

FIRST QUARTER PERFORMANCE

In Q1 FY16, Steel production grew by 37% y-o-y.

“This was possible due to enhanced capacity utilization of Angul and Oman Steel plants. JSPL sold 1.1 MT of steel in Q1 FY 16 thus registering a growth of 39 % y-o-y.”

In spite of higher sales volumes, turnover of JSPL standalone declined by 6 % y-o-y from 3324 Cr to Rs. 3134 Cr due to decline in Net Sales Realization. Realization continues to be under pressure due to unabated import of steel from China, Korea and other countries, it said.

JSPL standalone EBITDA on a y-o-y basis decreased from 1192 Cr to 710 Cr due to higher raw material cost and declining NSR (realization)

However, Standalone EBITDA compared to Q4 FY15 to Q1 FY16 increased by 14% from 622 Cr to Rs.710 Cr and increased by 29% on a consolidated basis from 790 Cr to 1018 Cr on account of better product mix, enhanced operational efficiency and robust performance in overseas operations (Oman and Australia).

Consolidated PBT and PAT continues to be impacted due to higher Depreciation (Rs. 747 Cr) and Finance cost of (Rs 852 Cr).

In Q1 FY16, Lack of captive coal — coal mines were de-allocated on 31 st March, 2015 — and lower merchant prices impacted PLF.

EBITDA for Q1 FY16 was 170 Cr compared to 389 Cr in Q1 of FY15. EBITDA declined due to lower utilization of plant and higher coal costs.

“Coal availability through E-auction has now improved and JPL is able to procure coal at competitive prices. This should help in progressive improvement in PLFs of JPL in FY16.”

The company’s Omani plant continued to perform well in Q1 FY16. Billet and rounds production increased to 0.25MT. Similarly, Sales and EBITDA on YoY basis grew by 6% and 9% respectively. Rolling mill project with a capacity of 1.4 MTPA Rebar is progressing well and the cold trial is expected in October, 2015. The mill will be commissioned in Q4 FY16.

Long wall 6 mine at Russell Vale at its Wollongong Coal unit in Australia commenced production in May 2015 at the approved 365m mining area extension.

“Development for the quarter has focussed on further continuation of opening up the main gate and tail gate entries for long wall 9 and gate road development has commenced. Wongawilli colliery continues to be under care and maintenance. Some of its equipment is being recovered to support the Russell Vale operation,” JSPL said. During Q1 FY16, 0.22 MT of coking coal was produced at the unit, thus registering a 4.65 times increase y-o-y.

In South Africa, coal production in more than doubled during the quarter compared to a year ago. Sales increased by 8%. The mine registered a modest PAT.

In Mozambique, coal production during Q1 FY 16 was 0.21 MT. “The mine continues to focus on reduction of mining and logistic costs and is gearing itself for better performance in FY16,” it said.

JSPL is working on the following two new projects — a 1.4 MTPA Rebar mill in Angul, expected to be commissioned by March, 2016, and a 1.4 MTPA Rebar mill in Oman, expected to be completed in Q4 FY16.

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