BAZAAR: #1QWithCNBCTV18 | @jswsteel Reports Good #Q1FY27 Numbers Jt MD & CEO, Jayant Acharya To ...
What Jayant Acharya said
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Jayant Acharya, JSW Steel's Joint Managing Director and CEO, discussed the company's Q1 FY27 performance and Q2 outlook. He reported a strong quarter with capacity utilization at 94% (excluding blast furnace 3 under shutdown) and a quarter-on-quarter NSR improvement of roughly 6,500 rupees per ton, offset by higher costs. For Q2, he noted long prices have fallen and monsoon season impacts demand, while coking coal costs are expected to rise $12-15 per ton (after a $17 per ton increase in Q1). He declined to give an EBITDA band but expects higher volumes from blast furnace 3 ramp-up and Ohio operations to improve absolute numbers. US operations achieved $16 million EBITDA from break-even, and Italy posted €7 million EBITDA with a €33 million grant for rail modernization. He confirmed no equity raise, net debt to EBITDA at 1.46, and reiterated a target of 62 million tons by 2032 with net debt to EBITDA below 2.5. He declined details on JSW1 IPO and said growth will focus on brownfield expansion.
Key takeaways
Q1 NSR improved roughly 6,500 rupees per ton quarter-on-quarter, offset by higher costs and better mix.
Coking coal cost rose $17 per ton in Q1; Q2 estimate is $12-15 per ton upward.
US operations delivered $16 million EBITDA in Q1, up from break-even in Q4.
Net debt to EBITDA is 1.46, with no equity raise planned.
Target of 62 million tons by 2032, with net debt to EBITDA below 2.5.
Right, let's focus on the next big name then. JSW Steel reported a good set of numbers, an all-round beat is what we saw there. To understand how was the past quarter and what's the trajectory going ahead, we're joined by Mr. Jayant Acharya, the Joint Managing Director and CEO at JSW Steel. Hi Mr. Acharya, good morning. Always a pleasure, sir, to have you on the show. Well, give us a couple of details first in terms of steel price move. What was the increase that we saw in quarter 1? And given that we're entering a seasonally weak quarter, what's the trajectory in quarter 2 from year on? How much of softness are you factoring in?
Yes, we had a strong operational performance. Our capacity utilization excluding our blast furnace 3, which was under shutdown, was at 94%. And we had consolidated sales which was helped by a better mix towards flats and a better value-added and special product overall mix. On the NSR, on the price realization, if you recall that the prices started recovering from January 26 and it went through to May, March, and that spilled over into quarter 1. So we have a quarter-on-quarter NSR improvement of roughly 6,500 rupees per ton, which was offset by higher costs and a better mix, and that's what's giving you the EBITDA return.
So the prices for longs have actually fallen during the last quarter itself, and during a seasonally weaker, rather a seasonally monsoon quarter, the long demand does get impacted, but not to the extent which long has done. So it's difficult to give you a number as to what the impact would be, but yes, there is a cost impact in quarter 2 because the coking coal prices are going up to some extent, and there would be a seasonally, I would say, impact because of the monsoons on the price.
You mentioned that input costs have gone up. So tell us about coking coal price increase. You had guided that it should go up around $15 per ton in quarter 1. Has that happened? What's the outlook of coking coal prices that you're working with for quarter 2? How much higher will it be?
For quarter 1, our coking coal cost went up by $17 per ton, slightly higher than what we had guided. Our quarter 2 coking coal cost we estimate to be in the range of $12 to $15 again upwards. While the coking coal prices have started moving down in the last week or two, I think the major part of that benefit would get reflected in the subsequent quarter.
All right, Mr. Acharya, put everything together. What's the outlook on the EBITDA margin? Given that volumes could recover, but it's a seasonally weak quarter coupled with the higher coking coal cost that you just spoke about.
In quarter two, what you will see will be increased volumes from JSW Steel on the ramp up of blast furnace 3 at Vijaynagar and our Ohio operations in the US. That should play into the overall absolute number. On the cost side, I already gave you an idea that the coking coal would impact costs to some extent. The prices are difficult to estimate, and therefore I'm not able to give you a band of EBITDA what would appear in quarter two, but yes, I think the volume would help us to be able to improve the absolute numbers. The other thing which is on the positive is that the iron ore prices have also started reducing both in Odisha and recently from NMDC, and that would play into quarter two to some extent as we go into the second part of the second half of the quarter.
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