Analyst Meet Presentation Q4 FY11 - jsw.in · Europe import CIF S.European port Russia Black Sea export FOB China export FOB Shanghai N.America domestic FOB US Midwest mill 9 ….

Analyst Meet Presentation

Q4 FY11

2

Agenda

Key Highlights

Steel Scenario

Projects Update

Performance Review

Guidance

3

Key Highlights

4

A year of many successes..

Equity infusion by JFE of ` 5,410 Crores (~$1.2 bn) for 14.99% equity stake, one of the largest

FDI in the Indian Metals and Mining space

Deleveraged Balance Sheet to support next phase of growth

Access to cutting edge technologies and fast growing automotive steel market

Operational excellence to result in cost reduction

JSW JFE strategic partnership

Acquired 49.3% stake for ` 2,357 Crores ($528 mn) including open offer

Access to 3.3 mtpa state of the art HRC facilities in Western region - India’s fastest growing

steel market

Production in Mar 2011 quarter was near rated capacity, generated positive PAT for the quarter

Plant integration and cost efficiency program are underway

Ispat Acquisition

USD/ ` = 44.65 (RBI reference rate as on 31.03.11)

5

Best ever performance…

Highest ever crude steel production: Q4FY11 – 1.65* million tonnes, FY11 – 6.43* million

tonnes

Highest ever sales volume: Q4FY11 – 1.73 million tonnes, FY11 – 6.10 million tonnes

Highest ever gross turnover: Q4FY11 – ` 7,615 Crores, FY11 – ` 25,131 Crores

Highest ever EBITDA: Q4FY11 – ` 1,658 Crores, FY11 – ` 4,856 Crores

Highest ever Net Profit Q4 FY11 - ` 833 Crores

Key performance highlights

Strengthened Balance sheet – consolidated net debt to equity ratio improved to 0.84 at FY11

end from 1.65 at FY10 end

Consolidated weighted average debt cost has come down to 6.56% in FY11 from 6.77% in

FY10

Improved financials

* Excludes 0.079 million tonnes produced from trial run of Casters of 3.2 million tonnes expansion project

6

Other milestones

JSW, with Ispat acquisition, is poised to be the largest steel producer in India by crude steel

capacity

Chile Iron ore mine: Commenced mining operations in Nov 2010 and shipped 1st consignment

in Apr 2011.

Blooming mill: Commissioned Phase I in Jul 2010 and Phase II (4 stands out of 8) in Mar 2011

at Salem. Entry to high–end auto forging steel, have bagged order from Honda for crank shafts.

Beneficiation Plant – 2: Commissioned Phase I (1,500 TPH). It will enable the plant to use low

grade iron ore thus reducing iron ore cost and also lead to increase in productivity.

CPP – 3: Commissioned 300 MW power plant. Now, all steel production/facilities of JSW

source 100% of their power requirement from captive power plants.

7

SteelScenario

81

143130

191

174186

255

370

448

324

478

425 420

100

150

200

250

300

350

400

450

500

0

50

100

150

200

250

Jan-0

9

Ap

r-09

Jul-09

Oct-

09

Jan-1

0

Ap

r-10

Jul-10

Oct-

10

Jan-1

1

Ap

r-11

Indian Iron Ore 63% Fe dry / China import CFR N.China port

Scrap / Shredded / Rotterdam export FOB (RHS)

139

115

248

195

223

370

328

50

100

150

200

250

300

350

400

Jan-0

9

Ap

r-09

Jul-09

Oct-

09

Jan-1

0

Ap

r-10

Jul-10

Oct-

10

Jan-1

1

Ap

r-11

Coking coal contract Australian Spot HCC FOB

300

200

225 2

09 225

330

129

8

Raw Material prices have risen sharply….

Source: SBB (All figures are USD/tonne)

Q4FY11 Iron ore spot prices averaged $183/t vs. $134/t in

Q4FY10 (up by ~37% YoY)

FY11 Iron ore prices averaged $164/t vs. $99/t in FY10 (up

by ~65% YoY)

Iron ore price surged to $191/t in Feb 2011 whereas scrap

prices averaged $478/t in Jan 2011

Q4FY11 coking coal spot prices averaged $313/t vs. $216/t

in Q4FY10 (up by ~45% YoY)

FY11 prices averaged $243/t vs. $165/t in FY10 (up by

~47% YoY)

Coking coal spot prices surged to $370/t in Feb

2011, leading Q1FY12 contract prices to $330/t (up by

~47% QoQ)

593

752

658

839830

545

710

550

583

776

710

535

685585

608

763 715

650

781

627

962 943

500

550

600

650

700

750

800

850

900

950

1000

Jan-1

0

Feb

-10

Mar-

10

Ap

r-10

May-1

0

Jun-1

0

Jul-10

Aug

-10

Sep

-10

Oct-

10

No

v-1

0

Dec-1

0

Jan-1

1

Feb

-11

Mar-

11

Ap

r-11

May-1

1

Europe import CIF S.European port Russia Black Sea export FOB

China export FOB Shanghai N.America domestic FOB US Midwest mill

9

…. Leading to increase in Steel prices

Source: SBB, World Steel Association, WSD, Mysteel (All figures are in USD/ton)

HRC prices rose as raw material prices

for Q1FY11 went up.

Global steel production jumped above ~1460 million

tonnes (annualized) in Apr –May 2010, resulting in

higher inventories.

Finished goods price movement witnessed

disconnect from raw materials prices.

Prices dropped in May –Jul 2010 and remained soft.

HRC prices went up in Feb and Mar 2011

reflecting imminent cost push from higher raw

material prices.

The prices softened from mid Mar 2011 to

Apr 2011 but have stabilized now.

1,336

1,411

1,439

1,466 1,467

1,440

1,347

1,332

1,367

1,382

1,395

1,368

1,495

1,540

1,523

Jan-1

0

Feb

-10

Mar-

10

Ap

r-10

May-1

0

Jun-1

0

Jul-10

Aug

-10

Sep

-10

Oct-

10

No

v-1

0

Dec-1

0

Jan-1

1

Feb

-11

Mar-

11

World Crude Steel Production - Annualized

13.2

%

8.0

%

5.1

%

9.6

%

5.9

%

5.7

%

5.0

%

13.3

%

6.0

%

6.2

%

5.0

%

14.3

%

World BRIC China India

2010 2011 F 2012 F

Finished Steel Demand Outlook (% YoY growth)

10

Global Steel Trends

Source: World Steel (All figures are in million tonnes)

Year World BRIC China India

2009 1134 647 548 55

2010 1284 699 576 61

2011 F 1359 739 605 69

2012 F 1441 785 635 79

Global Finished Steel Demand

Production reached 1540 million tonnes in Feb

2011, reflecting significant improvement in steel

prices.

However Mar 2011 witnessed small supply side

correction.

Global steel demand growth was strong in 2010

on the back of low base.

Going forward demand outlook remains

favourable, Indian steel industry is projected to

capture double digit growth.

11

China Steel Market

Source: Mysteel, World Steel Association, JSW Steel (All figures are in million tonnes)

600

654

566

687679

567

643

547

649

618

644

500

520

540

560

580

600

620

640

660

680

700

Ja

n-1

0

Fe

b-1

0

Ma

r-1

0

Ap

r-1

0

Ma

y-1

0

Ju

n-1

0

Ju

l-1

0

Au

g-1

0

Se

p-1

0

Oct-

10

No

v-1

0

De

c-1

0

Ja

n-1

1

Fe

b-1

1

Ma

r-1

1

Finished Steel Production Apparent Steel Consumption

2.9

2.5

3.3

4.3

5.0

5.7

4.6

2.8

3.0

2.9 2.9

2.9

3.1

2.5

4.9

Ja

n-1

0

Fe

b-1

0

Ma

r-1

0

Ap

r-1

0

Ma

y-1

0

Ju

n-1

0

Ju

l-1

0

Au

g-1

0

Se

p-1

0

Oct-

10

No

v-1

0

De

c-1

0

Ja

n-1

1

Fe

b-1

1

Ma

r-1

1

Monthly Exports

China steel market registered negative demand growth in Q2 FY11, demand remained low in Q3 FY11

due to increased interest rates and slowing real estate growth

Production growth was low in Q3 FY11, reflecting reduced competitiveness due to removal of export

rebate, increased iron ore prices and currency appreciation.

Production peaked in Feb 2011 with rising steel prices but lower exports led to increase in inventories.

0.57

0.97

0.23

0.46

0.18

0.32

0.18

0.30 0.30

0.0

0.2

0.4

0.6

0.8

1.0

Oct-

09

No

v-0

9

Dec-0

9

Jan-1

0

Feb

-10

Mar-

10

Ap

r-10

May-1

0

Jun-1

0

Jul-10

Aug

-10

Sep

-10

Oct-

10

No

v-1

0

Dec-1

0

Jan-1

1

Feb

-11

Mar-

11

Import Export

56.3

59.3

62.7

65.6

Finished Steel Production* Real Steel Consumption*

FY10 FY11

11.3%

10.6%

12

Indian Steel Market

Source: JPC (All figures are in million tonnes)

* Production and consumption data has been netted off for double counting effect.

Finished steel production in FY11 increased by 11.3% YoY.

Real steel consumption in FY11 grew by 10.6% YoY.

Imports in FY11 declined by 7.9% YoY to 6.8 million tonnes.

13

PerformanceReview

0.974

1.3271.249

Q4 '10 Q4 '11 Q3 '11

Rolled : Flat

0.322

0.279 0.282

Q4 '10 Q4 '11 Q3 '11

Rolled : Long

1.600

1.647 1.636

Q4 '10 Q4 '11 Q3 '11

Crude Steel

YoY % QoQ %

36% 6%

14

Production – Q4 FY 11

YoY % QoQ %

-13% -1%

YoY % QoQ %

3% 1%

* Excludes 0.079 million tonnes produced from trial run of Casters of 3.2 million tonnes expansion project

All figures are in million tonnes

*

0.957

1.134

FY 10 FY 11

Rolled : Long

5.987

6.427

FY 10 FY 11

Crude Steel

15

Production – FY 11

3.709

4.940

FY 10 FY 11

Rolled : Flat

YoY %

7%YoY %

33%

YoY %

18%

*

* Excludes 0.079 million tonnes produced from trial run of Casters of 3.2 million tonnes expansion project

All figures are in million tonnes

0.3980.414

0.433

Q4 '10 Q4 '11 Q3 '11

Value Added

1.519

1.733

1.593

Q4 '10 Q4 '11 Q3 '11

Total Sales

16

Saleable Steel Sales – Q4 FY11

0.964

1.3861.240

Q4 '10 Q4 '11 Q3 '11

Rolled : Flat

YoY % QoQ %

14% 9%

YoY % QoQ %

44% 12%

YoY %QoQ %

4%-4%

0.261

0.074 0.077

Q4 '10 Q4 '11 Q3 '11

Semis

YoY %

QoQ %

-72%

-4%

0.295

0.272 0.276

Q4 '10 Q4 '11 Q3 '11

Rolled : Long

YoY % QoQ %

-8% -1%

All figures are in million tonnes

1.544

1.645

FY 10 FY 11

Value Added

5.720

6.099

FY 10 FY 11

Total Sales

17

Saleable Steel Sales – FY11

3.597

4.700

FY 10 FY 11

Rolled : Flat

1.249

0.344

FY 10 FY 11

Semis

0.874

1.055

FY 10 FY 11

Rolled : Long

YoY %

7%

YoY %

31%

YoY %

7%

YoY %

21%

YoY %

-72%

All figures are in million tonnes

174

280

31 Mar 2010 31 Mar 20113.780

1.123

Others JSW Shoppe635

1123

FY10 FY11

18

Retail Shoppe

Rolled: Long

Rolled: HR

Products

43%

Domestic sales

excluding semis

(Million tonnes,

% Share)

Value Added:

Flat

77%

77%23%

46%

39%

15%

61%

Sales through JSW Shoppe (In ‘000 tonnes)

No. of JSW Shoppe % Share through JSW Shoppe –FY11

Financials – standalone

19

` Cr.

Particulars Q4 FY 11 Q4 FY 10Growth

(%)FY 11 FY 10

Growth

(%)

Net Sales 7,032 5,167 36% 23,163 18,202 27%

EBITDA 1,658 1,427 16% 4,856 4,802 1%

EBITDA Margin 23.3% 27.4% 20.8% 26.2%

Net Finance Charges 153 194 -21% 695 859 -19%

Depreciation 383 285 34% 1,379 1,123 23%

Profit Before Tax 1,123 948 18% 2,782 2,820 -1%

Profit after Tax 833 717 16% 2,011 2,023 -1%

Diluted EPS 36.67* 37.75* -3% 96.33 105.94 -9%

* Not Annualized

1,427

1,658 184

(993)

932

145 60

(97)

EBIDTA Q4 FY 10 Volume Cost NSR Mix CER/Others FX Impact EBIDTA Q4 FY11

20

EBITDA MOVEMENT – Q4 FY 11 (Standalone)

` Cr.

4,802 4,856 281

(3,475)

2,943

586 65

(346)

EBIDTA FY 10 Volume Cost NSR Mix CER/Others FX Impact EBIDTA FY11

21

EBITDA MOVEMENT – FY 11 (Standalone)

` Cr.

Particulars Q4 FY 11 Q4 FY 10 FY 11 FY 10

Turnover 27.75 56.83 141.33 159.87

EBITDA + Other Income 4.57* 2.25 14.69* (40.92)

Profit After Tax (16.25) (12.90) (50.00) (70.03)

Sales (NT) Q4 FY 11 Q4 FY 10 FY 11 FY 10

Plate Mill 27,627 42,297 106,936 119,614

Pipe Mill 4,875 25,917 45,217 72,508

Production (NT) Q4 FY 11 Q4 FY 10 FY 11 FY 10

Plate Mill 12,197 69,444 119,887 195,275

Pipe Mill 4,776 23,788 42,148 73,969

USD mn

22

Operational & Financial Performance – US Plate & Pipe Mill

* Excluding one time inventory write –down of USD 7.21 mn

Production (million tonnes) Jan - Mar`11 Oct - Dec`10 Growth (%)

HR Coils 0.729 0.262 179%

Capacity Utilization 88% 32%

23

Operational & Financial Performance – Ispat Industries

Sales (million tonnes) Jan - Mar`11 Oct - Dec`10 Growth (%)

HR Coil 0.672 0.229 194%

Value Added Products 0.040 0.047 -15%

Particulars Jan - Mar`11 Oct - Dec`10 Growth (%)

Net Sales 2647 961 175%

EBITDA 407 (157) -ve to +ve

EBITDA Margin 14.9% -16.1%

Net Finance Charges 188 287 -34%

Depreciation 148 146 1%

Profit before Tax 70 (590) -ve to +ve

Profit after Tax 70 (409) -ve to +ve

` Cr.

Financials – consolidated

24

` Cr.

Particulars Q4 FY 11 Q4 FY 10Growth

(%)FY 11 FY 10

Growth

(%)

Gross Sales 7,792 5,844 33% 25,868 20,211 28%

EBITDA 1662 1,419 17% 4,947 4,603 7%

Net Finance Charges 217 249 -13% 945 1,104 -14%

Depreciation 429 327 31% 1,560 1,299 20%

Profit Before Tax 1016 844 20 % 2,442 2,200 11%

Profit After Tax 794 611 30 % 1,754 1,598 10%

15,656

14,156

7598

(4450)

(2739) (108)

(1801)

Net Debt as on

Mar'10

New Loan Taken Repayments Prepayments FX Impact Movement in FD/

MF

Net Debt as on

Mar'11

Net Debt Movement – consolidated

` Cr.

25

Cash and Cash equivalent - ` 2,318 Crores

Particulars FY11 Q4FY 11 Q3FY 11

EBITDA Margin 20.8% 23.3% 17.4%

PAT Margin 8.6% 11.7% 6.6%

Diluted EPS (`) 96.33 36.67* 16.97*

ROCE 12.6% 17.0% 9.2%

* Not Annualized

26

Financial Ratios

Particulars 31.03.2011 31.12.2010

Net Total Debt/Equity (x) 0.57 0.47

Net Total Debt/EBITDA (x) 2.05 1.77

Net Total Debt/Equity-Consolidated (x) 0.84 0.74

Net Total Debt/EBITDA-Consolidated (x) 2.90 2.68

27

Projects update

28

10 MTPA to 12 MTPA expansion at Vijaynagar

Debottlenecking of existing furnaces to augment Hot Metal capacity.

Set up new melt shop (SMS-3) comprising of Electric Arc Furnace and slab caster

to produce special grade thin slabs.

Total project cost – ` 2,695 Crores, Debt to Equity ratio – 2:1.

Expected completion by Jun 2013.

29

West Bengal poject

Construction of boundary wall is almost completed.

Commenced work on water pipeline and township

Development of coking coal and thermal coal mines is in full swing

Awarded contract to Hatch-CISDI International to provide consultancy services for preparation

basic design of the Integrated Steel Plant

Negotiations for Major equipment packages are in progress

Completed boundary wall Township work in progress

30

Ongoing projects summary

Coke Oven – 4: commissioned 2 batteries (total batteries - 4 and capacity - 1.92 MTPA). Coke

Oven – IV will ensure 100% captive coke generation.

Sinter Plant – 3: commissioned 5.75 MTPA capacity in Mar 2011. Plant – 4 of 2.4 MTPA

capacity will be commissioned in Q1 FY12. It will help to: increase productivity, substitute lump

consumption, and reduce fuel rate.

Steel Melting Shop: casters and converters have been commissioned.

Blast furnace – 4 (3.2 MTPA): will be commissioned in Q1 FY12.

3.2 MTPA expansion project

Have ordered major equipments like Pickling cum coupled tandem cold rolling mill, Continuous

Annealing line, Continuous Galvanizing Line and Acid Re-generation Plant.

Have completed 15% excavation and finalized Civil works orders.

Cold Rolling Mill - 2

Beneficiation Plant – 2 phase II (1,500 TPH), Pellet Pant – 2, CPP – 4 (300 MW captive

thermal power plant), and HSM –2 phase II will be commissioned in FY12.

Other projects

Coke Oven – 4: 2 out of 4 batteries ( total capacity of 4 batteries- 1.92 MTPA) have been commissioned.

Q3 FY11 Q4 FY11

31

3.2 MTPA expansion project progress

Q3 FY11 Q4 FY11

Sinter plant: Plant 3 of 5.75 MTPA capacity have been commissioned in Mar 2011. Plant IV of 2.4 MTPA

capacity will be commissioned in Q1 FY12.

Q3 FY11 Q4 FY11

Steel Melting Shop: Casters, converters and LHFs have been commissioned.

Blast furnace – 4: will be commissioned by Q1 FY12 end.

Q3 FY11 Q4 FY11

32

3.2 MTPA expansion project progress

33

Other projects' progress

Q3 FY11 Q4 FY11

Blooming Mill: Phase II (4 stands out of 8): commissioned in Mar 2011.

Beneficiation Plant – 2: Phase I (1,500 TPH) has been commissioned, Phase II (1,500 TPH) will be

commissioned in FY12.

Q3 FY11 Q4 FY11

34

Guidance

6.10

9.00

FY11 FY12 E

Saleable Steel Sales

35

Guidance for FY12

6.43

8.75

FY11 FY12 E

Crude Steel Production

36%48%

0.34 1.06

4.70

0.88 1.54

6.58

Semis Rolled Long Rolled Flat

Saleable Steel Sales – Product wise

YoY %

45%

YoY %

40%

YoY %

156%

FY11FY12 E

36

Q & A Session

37

Forward Looking and Cautionary Statement

Certain statements in this report concerning our future growth prospects areforward looking statements, which involve a number of risks, and uncertaintiesthat could cause actual results to differ materially from those in such forwardlooking statements. The risk and uncertainties relating to these statementsinclude, but are not limited to risks and uncertainties regarding fluctuations inearnings, our ability to manage growth, intense competition within Steelindustry including those factors which may affect our cost advantage, wageincreases in India, our ability to attract and retain highly skilledprofessionals, time and cost overruns on fixed-price, fixed-time framecontracts, our ability to commission mines within contemplated time andcosts, our ability to raise the finance within time and cost clientconcentration, restrictions on immigration, our ability to manage our internaloperations, reduced demand for steel, our ability to successfully complete andintegrate potential acquisitions, liability for damages on our servicecontracts, the success of the companies in which the Company has madestrategic investments, withdrawal of fiscal/governmental incentives, impact ofregulatory measures, political instability, legal restrictions on raising capital oracquiring companies outside India, unauthorized use of our intellectualproperty and general economic conditions affecting our industry. The companydoes not undertake to update any forward looking statements that may be madefrom time to time by or on behalf of the company.

38

Thank you