Analyst Concall
Jindal Steel to spend more on value-added pdts, supply chain
This story was originally published at 22:19 IST on 30 January 2025
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--Jindal Steel: Commissioning new blast furnace at Angul plant in Jan-Mar
--CONTEXT: Jindal Steel management comments in post-earnings analyst call
--Jindal Steel: Long-steel pdts 59% of Oct-Dec sales; flat-steel pdts 41%
--Jindal Steel: Oct-Dec avg sales realisation INR 60,931/tn, up 1% QoQ
--Jindal Steel: Expect to start Utkal B1 mine by end of Jan-Mar qtr
--Jindal Steel: See Jan-Mar iron ore cost down INR 100/tn QoQ
--Jindal Steel: Angul pellet plant Oct-Dec utilisation at 90%
--Jindal Steel: Looking to be self-sufficient in rake movements
--Jindal Steel: Hot-rolled coil utilisation will rise when mkt is favourable
By Aman Aryan and Anshul Choudhary
MUMBAI – Jindal Steel and Power Ltd. has said it will increase its spending on value-added engineering products over three years. This is expected to boost the company's earnings before interest, tax, depreciation, and amortisation per tonne, the management said in a post-earnings call with analysts Thursday. This round of capital expenditure will focus on cost efficiency, sustainability, increasing the share of value-added products, and improving the supply chain, the management said.
After announcing its December quarter earnings, the steel company said in a press release that it will earmark INR 234 billion for capital expenditure over the next three financial years. This allocation will include pending capital expenditure of nearly INR 74 billion out of the INR 310 billion spending announced earlier.
During the December quarter, the company's capital expenditure was INR 28.57 billion, taking the cumulative spending on the current expansion programme to INR 236.12 billion, the management said.
The company will invest in improving its supply chain as it looks to set up two transmission lines--a slurry pipeline for iron ore and a pipe conveyor project to connect coal mines to its units. Jindal Steel is also looking to be self-sufficient in terms of rake movement, the management said, adding that the company plans to add 67 rakes going forward.
Jindal Steel expects the quarterly volume run-rate to cross 2 million tonnes by the first quarter of financial year 2025-26 (Apr-Mar), the management said. It expects to commission the company's new blast furnace at the Angul unit in Odisha in the current quarter and run it at 70-75% utilisation in FY26. The plan to start the Utkal B1 coal mine is on track, the management said. The mine is expected to start delivering by the end of this quarter.
For the December quarter, the capacity utilisation at the pellet plant in Angul was 90%, and it is enough to feed both the direct reduced iron unit and the blast furnace, the management said. However, overall utilisation was affected in the December quarter by market dynamics, it said. The hot-rolled coil steel utilisation is likely to rise when the market looks favourable, the management added.
While iron ore costs rose INR 96 per tonne in the December quarter, coking coal prices fell nearly $1.4 per tonne, the management said. The company expects coking coal prices to fall a further $10 per tonne and iron prices to fall by INR 100-INR 200 per tonne in this quarter.
The share of long-steel products in the reporting quarter rose to 59% from 52% in the September quarter, while that of flat-steel products fell to 41% from 48%, the management said. The company's average sales realisation rose just 1% sequentially to INR 60,931 per tonne in the December quarter, despite tweaking the product mix as flat-steel product prices witnessed a fall of 9-10%, affecting average realisations. Jindal Steel's adjusted earnings before interest, taxes, depreciation, and amortisation per tonne fell to INR 11,209 for the December quarter from INR 11,467 in the September quarter and INR 15,472 a year ago, according to the company's investor presentation.
While Jindal Steel announced additional capital expenditure after releasing its results, the investor presentation showed the company has delayed its plans to increase capacity by a year. The company now expects to reach a crude steel capacity of 13.5 million tonnes per annum by the end of FY26 and increase it further to 15.9 mtpa by the end of FY27.
On Thursday, shares of the company closed over 1% lower at INR 840.05 on the National Stock Exchange. End
US$1 = INR 86.62
Edited by Rajeev Pai
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