Joint Managing Director & CEO, JSW Steel Limited
In-Line Q3 For JSW Steel | Will Keep A Tab On Net Debt To EBITDA Ratio, Says Company | CNBC TV18
3QWithCNBCTV18 | JSW Steel Reports In-line Set Of Q3FY26 Numbers Joint MD & CEO, Jayant Acharya to CNBC-TV18 - Steel ...
About Jayant Acharya
Jayant Acharya, Joint Managing Director and CEO of JSW Steel, discussed the company's first-quarter performance for fiscal year 2027 in media appearances. He reported record sales and described the quarter as having "very strong operational performance." Acharya attributed the results to robust domestic steel demand, which he said grew at 8.3%, and a 15% quarter-on-quarter volume growth. He noted that capacity utilization, excluding the BF3 furnace, stood at 94%. Acharya stated that net debt to EBITDA improved to 1.46 from the previous quarter, with net debt reduced to approximately 46,000 crore rupees. He said the company's comfort level is to maintain the ratio below 2.5 as it expands capacity toward a target of 62 million tons. Looking ahead, Acharya said the July-September monsoon quarter typically brings seasonal impacts, but he expected "better traction in terms of demand and prices" in the second half of the year. He indicated that Q2 would see increased volumes from the ramp-up of the BF3 furnace at Vijayanagar and from JSW Steel's Ohio operations in the U.S. Regarding costs, Acharya said cooking coal would impact expenses to some extent but that iron ore prices have started reducing. He said he could not provide a specific EBITDA band for the next quarter due to difficulty in estimating prices. On expansion strategy, Acharya stated the company's focus is on brownfield growth and the Paradip greenfield project, and that it would only consider other assets if they are "really so attractive."
Transcript (18 segments)
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Host0:00
I think we're talking about steel now and JSW Steel is in focus. Nigel, take it away.
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Nigel0:04
Well, that's right. JSW Steel is the next management on our radar. The quarter three numbers more or less in line but that was predominantly because of pressure and pricing in the past quarter. The way ahead could look better. Let's welcome on the show Mr. Jayant Acharya who's joining us. Hi Mr. Acharya, good morning and good to see you. Let's start with the focus on demand. How is steel demand panning out in India as well as globally and could you help us out? What could it mean for your volume growth from here on, sir?
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Jayant Acharya0:34
Yeah, I think if you look at the global economic outlook by IMF, it outlines the fact that the global economy has been very resilient in spite of various uncertainties globally which we are facing. The steel demand in the rest of the world is doing reasonably okay. The steel demand in China, as we are aware, has been under strain. India, from a steel demand perspective, is the fastest growing as well as the economy is the fastest growing. So India is doing quite well. We see the current quarter, coming quarter, quarter four to be seasonally strong from a demand standpoint and we are well placed to take advantage of the demand in India.
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Nigel1:24
Okay. The demand in India is sounding quite optimistic and to be fair the central government as well has given a good amount of assistance because duties have been put in place to protect the domestic steel industry post which there have been price increases. Help us, Mr. Acharya, quantify these hikes and is there headroom for further hikes even from here on?
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Jayant Acharya1:43
Yes. So if you look at it, I think we are thankful to the government of India for having taken effective trade measures in the last two months, both from anti-dumping point of view and safeguard on flat products. I think that's been very encouraging. The idea is to ensure that fair trade happens in India and the domestic industry is at a level playing field. From a price standpoint, if you look back, the prices which were there in the last quarter have been at a multi-year low. The prices have now started recovering. We see price increases in the month of January and we think there is a possibility for some price recovery in this quarter during February and March as well. We'll watch how it goes but from a raw metal standpoint, the costs are also going up. I think part of the price movement is also on account of cost. You see coal prices which have gone up from the lows of about 180s to now more than 240 and touching 250 yesterday for B Australia that will have an impact on cost and we need to look at the iron ore side. While it has been rangebound and we do expect it to be rangebound, that's another cost area which we need to watch and see whether it impacts us in this quarter or not. Otherwise from a margin perspective, I think these prices should enable us to improve our margins after offsetting some of the costs.
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Nigel3:26
Mr. Acharya, your apologies but I need to push you a little bit more. Quantify the steel price increases that you're talking about and also since you mentioned that coal costs have moved up a little bit. Can you quantify what is the cost of coal increase that you are working with for the coming quarter?
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Jayant Acharya3:43
Yes. So from a price point of view, the prices started, if I take hot as an example of flat products, the prices started moving from the second half of December and I think we saw an increase of about 1,500 rupees in December and about 2,000 rupees in the beginning of January. If you look at the coking coal cost in the last quarter, the coking coal cost went up by about $5 and we had guided between $3 to $5 and that's where we have been. Iron ore has been rangebound, actually we could save a little bit on the iron ore cost by improvement in our efficiencies and blend. So with that, we were able to offset some of the cost but still the lower prices had an impact on the margin. I think our main achievement for the past quarter is the volume story. We had a very good production maintaining 93% capacity utilization excluding our BF3 which is under shutdown at Vijayagar for capacity augmentation. We have been able to do record sales in the quarter 1 both from consolidated and Indian operations point of view. And basically we have been able to mitigate the impact of the drop in prices through a better product mix. Our value added sales reached the highest ever at 4.54 million tons.
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Nigel5:11
All right, Mr. Acharya, what works in your favor is operating leverage, the focus on value added sales and also steel prices have moved up by 3,500 rupees but the other part of the puzzle will be the coking coal cost, right? Since we have seen globally prices have moved up, for you how much will prices move up by, the cost of coking coal?
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Jayant Acharya5:32
In the quarter four, as I was mentioning, the coking coal prices are moving because of some seasonal disturbances in Australia. We expect in the range of $15 to $20 impact in this quarter.
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Nigel5:44
Okay, got that. Let's focus on the globe then. Mr. Acharya, the global scenario has become very very volatile due to President Trump. Could you tell us how is the markets doing, the United States as well as the European operations? How do you expect it to pan out in the coming quarter?
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Jayant Acharya6:00
So, US operations have declared a positive EBIT and so has the Italian operations. If you look at a 9-month number, I think US has turned from a negative $32 million to a positive $36 million. So that's a good thing. US, we have taken a shutdown which is right now in progress for augmentation of some vacuum degassing facilities and caster upgradation in Ohio that would enable us to produce more value added steel. Italy is doing reasonably stable. They will continue to do a similar kind of a performance I think in quarter 4. As we see, US operations should marginally improve in quarter four versus quarter 3.
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Nigel6:52
Italian operations stable. US operations could improve in quarter 4. Got that. What about the progress with regard to that big deal you announced with JFE? Give us some timelines. How do you see things panning out?
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Jayant Acharya7:04
Yeah. So this asset, you know, BPSL asset, we are getting into a joint venture both together and JFE brings in their technological expertise to India. We hope to add value added products which are not produced in India and with our expertise on project execution and operational cost efficiencies. I think it'll be a very strong value which both partners can create. The asset has potential to grow from the current 4.5 million tons to 10 and beyond. This, what should I say, unlock of value will help us to grow both the BPSL asset and the JSW Steel expansions parallelly and that will be growth accretive for the JSW shareholders and stakeholders at large.
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Nigel7:56
All right, Mr. Acharya, you know you all have been focusing a lot on the organic growth side and you'll have already said you'll be more than 50 million tons out but you'll have mentioned a line on inorganic growth. Is there something on the inorganic growth front that you are looking at or is it mostly going to be organic?
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Jayant Acharya8:13
No, nothing on the anvil as such. I think that's something which is general. We continue to look for any assets which make strategic sense. If any would come up, we would look at it.
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Nigel8:23
The next obvious question would be what about the net debt outlook? It's ballpark around 80,000 crores but you have ambitious growth plans. Where is that headed?
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Jayant Acharya8:33
So our net debt ratios is something which I would draw your attention to. Net debt to EBITDA has come down to 2.91 and we have been consistently improving the net debt to EBITDA over the last few quarters and we are keeping our eyes on that as we grow our capacities. We have been able to reduce our weighted average interest rate to 6.51% from 6.67% last quarter. This is one area where we are actively working to see that we reduce our cost of interest. So good on the debt side. And this will go down naturally with the unlock of value from BPSL once the transaction is consummated in two phases, partly in March and partly by June.
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Nigel9:18
Well, always a pleasure speaking to you, Mr. Acharya. You're sounding optimistic on demand. Prices have moved up around 3,500 rupees. Input costs though have spiked up. The price hikes and operating leverage will more than offset the higher input cost.