Lack of market demand led to drop of sale in steel products of JSPL - Mr Ravi Uppal
Economic Times reported that MD & Group CEO, JSPL spoke on various topics on the drop of sale in steel products and how he was having an optimistic outlook on demand rising by at least five per cent by end of FY 17.
Edited excerpts:
ET Now: Most of your top line growth this quarter as I look has come in from
volumes, what were your realisations and what is the average drop
year-on-year that you are seeing?
Mr Ravi Uppal: We are talking about quarter-1 and in the quarter-1 market emand did not grow, the domestic demand in the first quarter grew just by 0.4% and this led to drop in prices of the steel products in the market, the prices which had improved considerably in February and March early this year they actually saw a decline in their levels.
In the domestic market our total delivery was same as the last year in terms of total sale, but the sale was slightly lower for the reason that we took a shutdown for six weeks in our Angul facility, but now that plant is back in full force and in the second and third quarter it should be operating business as usual. As for the consolidated steel sales are concerned we are up by about nearly 5%, our Oman plant has done exceedingly well and they utilised their capacity of the new steel melt shop to nearly 80% level.
They also have an EBITDA level at 26%. So Oman plant has worked exactly the way we wanted it to do and I am sure that in the quarters to come also we will have a good performance delivered by Oman plant.
As far as the Indian market is concerned, I am quite optimistic that in the third and the fourth quarters which are the busy season the steel demand is going to look up and we are hoping that the year will end with a overall increase in demand by nearly 5-6%.
ET Now: How many more steel capacities are yet to come on board?
Mr Ravi Uppal: The Raigarh plant has a capacity of 3.6 million and right now in Angul our capacity is about two million ton. Now there is a phase 1-B of Angul which was in a very advanced completion but we have slowed down on that project, now we are making effort to see that comes on stream so once Angul expansion comes along through the blast furnace so we would be adding another 2.5 million immediately and 3.5 million in about six months time.
So what I am basically saying is that once Angul expansion is done the total Angul capacity will be about 2 million and 3.5, 5.5 million ton and add to that 3.6 million ton of Raigarh, so this basically means that our total capacity will be about nine million tons.
ET Now: We have see your peers get into action when it comes to controlling their costs since steel price movement has been pretty volatile now, cost control is the only way to EBITDA growth but we have not seen that from you, I mean, some of your major expenses; power, fuel are rising are you getting impacted by the rising coking coal prices?
Mr Ravi Uppal: If you look at the EBITDA level we have improved the EBITDA compared to the last quarter. If you take the Q4 2016. EBITDA was at a level of 19% and this has got improved to 21% and that too in a quarter when the demand was very tepid but going forward given our product mix with a lot of focus on structures, rails etc and high quality plates I do see that our EBITDA levels should improve. And I would tend to believe that by the time we are done with the third and fourth quarter our EBITDA should be in the range of 25.
ET Now: Are you not worried about the rising input costs and how are you planning to put a lid on the margin compression?
Mr Ravi Uppal: The coking coal prices started to rise just about a month and a half ago so there was not so much increase in the first quarter but from early July, middle July coking coal prices started to rise, they rose very sharply in the month of August and hey continue to rise even now, but for us it is a mixed feeling because we are one of the few steel companies in India which own the coking coal mines. We have got mines in Australia as well in Mozambique so with the price levels rising to the level that we have today we have resumed our mining operations at both the location full steam and I think that is going to benefit JSPL considerably.
ET Now: You mentioned value added steel as the key margin driver going forward, how much contribution do you target to your total revenues?
Mr Ravi Uppal: You know that you may produce the same amount of steel but on a per ton basis if you go for value added grades your realisation is higher, competition is less. So we are highly focussed on developing plates, steel structures, of rails, of a kind that will bring us higher contribution on a per ton basis. That is something we have been striving we do not want to be a doggy dog market, that has been part of our strategy and we have been fairly successful, even in this quarter we have introduced several products which are for the automotive industry as well as for the defence industry.
ET Now: Have you secured a PPA for your 1000 megawatt power plant which is on sale to JSW Energy |bse 2.89 as well and for how much of your power capacity have you been able to secure the PPAs?
Ravi Uppal: We basically have three units of power, EUP-1, EUP-2 and EUP-3. As far as the EUP-2 is the one where we have the coal linkage and I am happy to inform that we have more or less tied up all 1200 megawatt. And as far as the EUP-1 which is 1000 megawatt you are mentioning there we have tied up nearly 400 megawatt and we are hoping that in the next six months time we should be able to tie up most of the remaining capacity.
Source : Economic Times