Steel Saviour: Performance Turnaround For JSPL; Thanks To Steel Business
Despite failing to cross the border line of loss yet again, Naveen Jindal's, Jindal Steel and Power Limited (JSPL) has a reason to cheer.
The company has managed to narrow down the consolidated loss to 100 crore in the quarter ended 31 March 2017, compared to the figure of Rs 637 crore loss in the year-ago period. After nine consecutive quarters of losses, the company has not yet projected profit, but what is impressive is the momentum of the improvement it is working to gain, on the back of certain factors.
The core steel business came at the rescue, as the sector sees improvement in realisations and government support. Amidst the slow domestic demand scenario, JSPL has been managing its margins on the back of two major components - Pellet business and exports.
The sale of pellets increased by 33 per cent to reach a level of 1.70 million tonnes. During the FY17, the company has managed to emerge as the largest exporter of pellets with the total export volume of 2.33 million tonnes. The overall total JSPL sales volumes stood at 0.92 million tonne.
The second accelerator was the steel export business, which grew 300 per cent, standing at a figure of 210000 million tonne. The company was able to have higher utilisation rate on the whole of FY16-17, with exports playing the major part, up by 102 per cent y-o-y and the declining imports, down by 38 per cent y-o-y.
Apart from this, the company is seeing the major progression in the Angul Blast Furnace, Odisha, which would further boost its domestic capacity by good numbers. "The company is looking to not only ramp up production steadily from its Angul complex but also the better cost of production. The company would be commissioning the Basic Oxygen Furnace by October 17, which would enhance the capacity of steel melting shop at Angul to 5 million tonnes per annum from the current 2.5 ", said the company statement. With the expansion at Angul, steel capacity will increase to 8 million tonnes, driving strong volume growth, as estimated by Motilal Oswal Securities.
Looking at the power sector, the company, however, is still not able to shred off the pile up of the interest and depreciation on the operational performance.
Jindal power continues to face its demand and realisation challenges, with low plant load factor (PLF). The overall Profit after tax stood at a loss of Rs 84 crore. However, the company's has managed to maintain a positive outlook. The revenue for the fourth quarter FY17 increased by 28 per cent compared to the same quarter in FY16. The EBITDA recorded an improvement of 73 per cent y-o-y (Year on Year), standing at Rs 1552 crore, compared to Rs 898 crore in the same quarter year ago.
This is clearly reflected in its narrowing down loss from Rs 637 crore to Rs 98 crore, comparing the 2 years 4th Quarters.
Going forward, according to Motilal Oswal, the Indian steel mills, have new challenges in the form of a volatility in coking coal prices and appreciation of the rupee. The weakening global market might impact exports. But, JSPL benefits from a spike in coking coal prices as a significant portion of its steel production is based on sponge iron and it operates coking coal mines in Mozambique and Australia.
As better realisation, exports and capacity expansion work well for the company, JSPL is aiming to increase its production by nearly 50 per cent during FY18. Besides launching a major marketing thrust in the domestic market, it is also targeting to export over a million tonne of steel and 2.0 million tonnes of pellets during the new financial year.
