Joint Managing Director & CEO, JSW Steel Limited
JSW Steel Q1FY27: CEO Jayant Acharya Expects Stronger EBITDA In Q2
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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 (17 segments)
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Interviewer0:00
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?
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Jayant Acharya0:32
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.
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Interviewer1:25
Okay. Can you give us some more clarity though on the price outlook for quarter 2?
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Jayant Acharya1:32
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.
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Interviewer2:17
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?
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Jayant Acharya2:31
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.
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Interviewer3:00
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.
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Jayant Acharya3:13
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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Interviewer4:07
Okay, we've got the India bit out of the way. Let's talk about the overseas operations. The US has seen some improvement. Even Italy has seen some improvement. Do you expect both these two operations to continue to improve from here on?
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Jayant Acharya4:20
The Ohio operations have done well. Their caster upgrade and the vacuum degassing are all in place. Their volumes have gone up. The unit is ramping up well. Baytown has also done well, and if you see the overall US operations, it has performed well. They have done an EBITDA of $16 million from virtually a break-even in quarter 4. If you look at the Italian operations, in quarter 1 we have had a €7 million EBITDA in spite of an annual shutdown which was there in the rail mill. On the other positive is that we have signed the accord program with Italy, and that will help us to fast-track our rail modernization project. We have received a €33 million grant in this ADP, and we expect better orders now from the Italian rail. So both US and Italy should improve operations and results therefore in quarter two.
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Interviewer5:31
Let's focus on the leverage in books then, Mr. Acharya. As you had guided, you know, that deal with JF has been done and that's where the debt numbers are coming down. But what's the capex outlook from here on? And also the street will be interested to know whether or not there's a possible equity raise that's in the works. Is there a QIP? Is something in the works?
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Jayant Acharya5:50
No equity for funding plan. Our debt, net debt to EBITDA, you're right, has fallen and it's at 1.46. We had said that while we grow our capex and while we go towards our target of 62 million tons in JSW Steel by 2032, we would be comfortable with a net debt to EBITDA below 2.5. I think we have reached that number quite well in advance. But we would keep our focus on this and see that our ratios, our financial prudence is such that the ratios are well maintained.
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Interviewer6:25
Okay, sub 2.5. Got that. Give us some details about JSW1 IPO. You're saying that you're going to be raising some money via that. So, how much are you looking to sell? How much will JSW Steel hold in that particular unit?
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Jayant Acharya6:38
So, JSW1 is looking at various opportunities, and one of them is to get into the IPO. At this point of time, I think it is difficult for us to be able to disclose too much more. I think we'll wait for them to file the prospectus and then see the details.
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Interviewer7:00
Okay, Mr. Acharya, you have been mentioning that you are going to be looking to scale up capacity. Now, Vidanta Steel and Iron that's been demerged. Part of the street believes it could land up in more experienced steel hands. Are those hands those of JSW Steel?
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Jayant Acharya7:15
The way we have charted our growth path from now from 30 million to 62 million is mostly through brownfield and Paradeep, which we have started the greenfield in a modular fashion. We believe our specific cost of investment is one of the best, and we would be able to put up world-class facilities at very competitive costs. We would focus on that unless there is an asset which is really so attractive that we need to look at it. So as of now, I think our focus would be to expand our own brownfield growth path which we have already guided.
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Interviewer7:57
Okay. All right, Mr. Acharya, always a pleasure having you on the show. Thanks a lot for joining in and telling us about the past quarter and the trajectory ahead. All the best to you and the team in the second quarter as well.