New Delhi/Mumbai: JSW Steel expects to improve margins in the ongoing fiscal year, driven by cooling input costs, rising steel prices, and enhanced operational efficiencies, Jayant Acharya, joint managing director and chief executive, said.
“We had a strong financial year (FY24) in spite of Q4 challenges. We expect that FY25 will continue to be good as well,” Acharya told Mint.
“This is because the cost will come down and the prices are now picking up after bottoming out. So, we expect prices to be stable, operating efficiencies to improve with some cost-saving projects, enhancing our margins and the absolute Ebitda,” he said, adding that sales volumes will also pick up after the ongoing national elections.
The Sajjan Jindal-led steel company reported a 65% fall in profit during Q4FY24 due to high input costs and other expenses. The cost of raw materials consumed by the company rose to ₹24,541 crore in January-March, against ₹23,905 crore in the same period of FY23. The company’s consolidated Ebitda, or earnings before interest, tax, depreciation, and amortization, dropped 15% sequentially to ₹6,124 crore. Its operating margin stood at 13.2% during the quarter.
Imports from China, though, remain a cause for concern, given their demand is poised to remain flat while global demand is expected to increase by 30 million tonnes (mt). About 35-40% of this increased demand is likely to come from India, Acharya said.
“India is growing at a faster rate than other economies and we have witnessed Chinese exports going up overall in the world this year also. We remain concerned about the imports coming into the country. Last year, these imports from China went up by 93% and stood at about 2.7 million tonnes,” he added.
The company continues to closely monitor the imports coming into the country and has urged the authorities to keep a close watch as well, not just on China but also other Asean countries, with whom India has a free trade agreement (FTA).
The company plans to maintain its share of exports as a proportion of the total sales volume at 12-15%. “The European market has bottomed out, the US has some barriers in place, but the Middle East and other areas will continue to show dramatic growth in infrastructure manufacturing and so our focus remains optimistic as we continue to tap the available opportunities,” he added.
Exports during FY24 accounted for 13% of the total sales volume of 24.8 mt.
JSW Steel has proposed ₹20,000 crore of capital expenditure for FY25, as it aims to raise its manufacturing capacity to 50 mt by 2030, from more than 29 mt currently.
This comes at a time when the company’s net debt remains significant at ₹73,916 crore, even after lowering by ₹5,305 crore during Q4FY24. The company believes its debt level is not yet an irritant in its expansion plans as the ratios remain within limits.
“The net debt is going down continuously, and we will continue to expand as we have been (doing), as the ratios remain within the range. We will keep our financial allocation of capital, we don’t see a challenge, whether we will be able to reduce it (net debt) that is difficult, but our focus is on keeping the ratios healthy,” Acharya added.
The Mumbai-based steel manufacturer will continue to evaluate various options for refinancing it’s maturing debt, including foreign and domestic debt instruments, to optimize its borrowing costs and ensure financial stability, Acharya said.
The company also recently announced the acquisition of Minas de Revuboe Limitada (MDR), a premium hard-coking coal mine project in the Moatize Basin of Tete Province in Mozambique. The company acquired 92.19% of the asset for $80 million, with board approval on extending it to 100%. The development of the mine will begin after the full agreement is fully closed and approved.
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Published: 19 May 2024, 04:34 PM IST