Agenda. Performance Overview. Overview (Group and JSW Steel) Projects Update. Business Environment

Transcription

1 January

2 Agenda Overview (Group and JSW Steel) Performance Overview Projects Update Business Environment 2

3 Agenda Overview (Group and JSW Steel) Performance Overview Projects Update Business Environment 3

4 JSW Group overview USD 9 billion group with presence across core sectors JSW Steel*: India s largest integrated steel producer. (Steel Capacity: 14.3MTPA^ ) JSW Cement: Slag cement plant 5.2 MTPA capacity by 1QFY13. (Current capacity 0.7 MTPA) JSW Energy*: Engaged across the value chain of power business(operational plant 2,600 MW) JSW Aluminium: A foray to set up alumina refinery and develop and operate bauxite mines JSW Infrastructure: Engaged in development and operations of ports. (Goa and Jaigarh Port) JSoft Solutions: An IT & ITES arm of JSW group Group market cap ($3,287mn) Business Turnover EBITDA PAT Cash profit^^ JSW Energy 1,162 JSW Steel 2,125 JSW Steel 5,793 1, JSW Energy JSW Infrastructure JSW Cement Total** 6,790 1, ,016 As on Dec 31, 2011 *Listed company ^ Including 3.3 MTPA of Ispat Industries All figures are in USD millions for FY11, USD/ ` = (RBI reference rate as on ) **ISPAT Industries has been consolidated using Equity Method, its turnover for12m ending Mar 2011 was $1.99bn. ^^ Cash Profit= PAT + Depreciation 4

5 JSW Steel at a glance India s largest integrated steel company Installed capacity of 14.3 MTPA^ Combination of state-of-the-art steel making technologies: Corex furnaces, DRI and Blast Furnaces JSW Steel Indian operations Six manufacturing facilities Only steel group with dominant position in South and West India s largest single location steel making facility at Vijayanagar (10 MTPA) JSW Ispat Acquisition of 49.30% stake in Ispat Industries Limited (renamed as JSW Ispat Steel Limited) with an Investment of `2,357 crores ($528 mn) - including Open Offer JSW Steel Overseas presence Mining: Iron Ore mining concessions in Chile, Acquisition of Coking coal mines in the USA, Coal/Iron ore mining concessions in Mozambique Plate and pipe mill in the USA ^ Including 3.3 MTPA of JSW Ispat USD/ ` = (RBI reference rate as on ) 5

6 JSW Steel Indian operations Strategically located manufacturing facilities in India Vasind and Tarapur: Downstream Unit 0.32 MTPA HR Plates 1 MTPA CRM 0.9 MTPA Galvanized steel 0.23 MTPA Colour-coated steel 30 MW power plant Dolvi (Ispat): 3.3 MTPA 2 MTPA Blast Furnaces, 1.6 MTPA DRI 3.6 MTPA Twin Shell ConArc 2.8 MTPA Sinter plant 3.3 MTPA HSM Nagpur (Ispat): Downstream Unit 0.33 MTPA downstream unit Salem: 1 MTPA 1 MTPA Blast Furnaces 1.3 MTPA Sinter plant 0.5 MTPA Coke Ovens 0.25 MTPA Blooming Mill 0.45 MTPA BRM 60 MW power plant Vijayanagar: 10 MTPA 1.6 MTPA Corex and 8.4 MTPA Blast Furnaces 13 MTPA Beneficiation plant MTPA Sinter plant, 9.2 MTPA Pellet plant 4.62 MTPA Coke Ovens 6.7 MTPA HSM, 1 MTPA CRM 0.6 MTPA WRM, 0.9 MTPA BRM 530 MW power plant Focus on domestic steel market, domestic sales contributed 85%* of FY 11 sales volumes Highly integrated plant*: 100% captive coke, captive power and industrial gases Waste utilization: 230MW power generation through waste gases, 88% solid waste utilization *Excluding Ispat Industries 6

7 In-process/Partially Completed Completed JSW Ispat Overview Turnaround Initiatives/actions State-of-the-art facilities: shore based 3.3 MTPA Integrated Steel Plant with own Jetty, and 0.3 MTPA downstream unit Latest technologies: Twin Shell ConArc Furnace, Thin Slab Casting Technology, and Compact Strip process (CSP) Liquidity infusion resulting in recommencement of operations and reduction in financing cost through removal of high cost working capital funding Product basket: HRC, CRC, Galvanized, Galvalume, Colour coated sheets, and pipes & tubes Alignment of Marketing Strategy resulting in freight synergies and VAT benefits. Refinancing of existing debt to reduce interest expenses. Shareholding Pattern Electricity supply from one of the units of JSW Energy s Ratnagiri power plant at competitive price. 6.7% 23.0% 21.1% 49.3% JSW Steel Other Promoters Lenders Others Acquired 45.5% stake through preferential allotment for `2,157 crores ($482 mn) in Jan 2011 and remaining in open offer for `200 crores ($45 mn) Sourcing of Iron ore lumps/fines from Bellary to substitute expensive Iron ore lumps/fines sourced from Orissa. Replacement of expensive imported coke by arranging 0.35 mtpa Coke (35% of total requirement) form JSL s coke batteries. Supply surplus Pellets (2 mtpa) from Vijayanagar plant to replace high cost imported pellets. Capital expenditure to increase capacity, plant integration and cost efficiency programs. USD/ ` = (RBI reference rate as on ) 7

8 JSW Steel overseas presence Exports: 15%* of FY 11 sales volumes International assets: Plate and pipe mill and Coking coal mines in USA, Iron Ore mines in Chile, and Coal mines in Mozambique US coal mines JSW Steel ownership: 100% Acquisition cost: $70mn US plate and pipe mill JSW Steel ownership: 90% Acquisition cost: $810mn Capacity: 1.2 Net MTPA Plates and 0.55 Net MTPA Pipes Chile iron ore mines JSW Steel ownership: 70% Acquisition cost: $252mn Production (~63% Fe): 0.8 MnT in FY12 Mozambique coal mines JSW Steel ownership: 100% 5 mining licenses awarded Early stage development in progress * Excluding Ispat Industries 8

9 Value proposition Marketing and products portfolio Marketing strategies Increased retail presence Diversified and rich product portfolio Delivering Growth Fastest growing steel company Low specific investment cost JSW JFE strategic partnership Performance improvement Iron Ore Coal/coke Captive power FY02-FY11 CAGR Driving Value Production 18% EBITDA 38% Strengthened Balance Sheet 9

10 Fastest growing steel company. One of the fastest growing steel company in the world, delivered 10x growth in 10 years 0.8 MTPA 2.5 MTPA, Colour coating line Overseas acquisitions in US and Mozambique, 1 MTPA CRM at Vijayanagar New 2.3 MTPA CRM at Vijayanagar, 16.3MTPA* Coking Coal mines in USA, Phase-I (3.5 MTPA) of HSM - 2, JSW-JFE strategic partnership Commissioning of HSM 1.6 MTPA 3.8 MTPA 7.8 MTPA Iron ore mines in Chile, Galvalume line 14.3 MTPA*, Acquisition of 49.3% stake in Ispat FY11 consolidated gross turnover ` 25,868 crores ($5,793 mn), EBITDA ` 4,947 crores ($1,108 mn) Phase II (0.25 MTPA) of Blooming Mill at Salem Phase II (1.5 MTPA) of HSM -2 to be commissioned 2 MTPA expansion at Vijayanagar 2.3 MTPA CRM at Vijayanagar 3 MTPA greenfield expansion at West Bengal Total Steel capacity including 3.3 MTPA of JSW Ispat USD/ ` = (RBI reference rate as on ) 10

11 . at low specific investment cost Scaling up operations rapidly at low specific investment cost with state-of-the-art technology Reduced Specific Investment Cost/ton of Capacity Expansion shows cost efficiency 2.5 Mtpa 3.8 Mtpa FY 2007 USD 550/mt 7.8 Mtpa FY 2009 USD 559/mt 11 Mtpa FY 2012 USD 545/mt 1.6 Mtpa FY 2006 USD 682/mt FY 2003 USD 923/mt Leveraging upon existing expertise and infrastructure 11

12 JSW JFE strategic partnership Overview Automotive technology agreements 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 Strategic Intent Project consultancy to build modern CRM2 Technology to manufacture substrate at Vijayanagar Technology for automotive steel in CRM-1 Substrate from JFE Benefits to JSW: Access to fast growing auto steel market Short learning curve Application engineering New product development Benchmarking and personnel training India s largest Steel Maker Delivered 10x growth in last 10 years Aggressive expansion plans in India Optimized capital structure through deleveraging Access to cutting edge technologies USD/ ` = (RBI reference rate as on ) Global size With~30 MTPA Capacity Operational Excellence with state-of-the-art technology Presence in fast-growing Indian market Future growth through equity participation in India Strategic production base in India for existing automobile customers Value Creation for Both Partners Yield improvement Energy efficiency Standardization of process Environment management Benchmarking General technical assistance agreements Quality improvement Operational Excellence Higher Productivity Lower Costs Short learning Curve Sustainable Business Operations Productivity improvement Fuel Rate reduction Maintenance practices Safety practices Training Talent Sharing 12

13 Marketing strategies Thrust on Branding and Promotional Activities Increased Focus on Retail Sales Diversified Product Portfolio Strong Customer Relationships Exports to over 100 Countries 13

14 Increased retail presence No. of JSW Shoppe % Share through JSW Shoppe 3QFY12 31% % Value Added: Flat 251 Domestic sales excluding semis % 21% (Mn tonnes, % Share) 16% Rolled: Long 43% 43% Rolled: HR Products 31 Dec Dec 2011 Others JSW Shoppe JSW Shoppe initiative awarded* for transforming unorganized commodity selling to organized branded retailing *Runner up in the SPJIMR Marketing Impact Award

15 Diversified and rich product portfolio Flat 68% Flat 77% Product Basket FY11 Sales breakup by end use markets Slabs Color Coated HR C Billets HR Plates Blooms GC TMT CRC Wire rods Infrastructure 28% Auto 15% General Engineering 11% Consumer Durables 2% Product Mix # # Based on capacity 32% 26% 42% 23% 18% 59% FY11 FY12 HR Coil HR Plate/CRC/Galvanised/Colour Coated Rolled Long Retail 36% Oil & Gas 2% Others 6% Complete suite of flat and long steel products with a range of value added products Growing focus on value added grades and products including Medium/High Carbon Steels, High Tensile and HSLA grades for Auto Sector, API grade steels for Oil & Gas sector, and Forging quality steels for auto application Widespread geographical reach with dominant position in domestic market 15

16 Continuous cost efficiency programs Beneficiation plant 2: Commissioned Phase-I (10 MTPA) in 4QFY11 Phase-II (10 MTPA) will be commissioned by Sep 12 Total beneficiation capacity would be 23 MTPA Sinter Plant: Commissioned Sinter Plant-4 (2.8 MTPA) in July 2011 Current total Sinter capacity MTPA Pellet Plant: Iron Ore Pellet Plant-2 (4.2 MTPA) was commissioned in July 2011 Current total Pellet capacity 9.2 MTPA Captive coke: Coal/coke Commissioned new 1.92 MTPA Coke Oven (comprising 4 batteries of 0.48 MTPA each) Current total coke capacity 5.12 MTPA Fuel rate and coal mix for coke making: Increased coal injection in blast furnace to reduce high cost coke consumption Optimization in coal blend/mix in coke making Focus on reduction of overall fuel rate Captive coke: Captive power Commissioned captive thermal power plant III (300 MW) in FY11 Captive thermal power plant IV (300 MW) will be commissioned in FY12 With completion of the captive thermal power plant IV, total captive power capacity would be 920 MW Increased use of low grade iron ore (up to 55%) Substituting high cost lump ore with Sinter and Pellet Lower iron ore cost, increased productivity and reduced fuel rate 100% captive coke production, Eliminates purchase of expensive coke from market Lower fuel cost with change in coal mix and fuel rate 100% captive power for all production facilities Lower power costs 16

17 Driving value Production (million tonnes) Turnover (` Cr./ USD mn) CAGR 18% 6.51 CAGR 34% 23,900 $5, ,736 $389 FY02 FY11 FY02 FY11 EBITDA (` Cr./ USD mn) CAGR 38% 4,947 $1,108 Created Value Market cap increased to $4,579mn as of end of FY11 from $58mn as of end of FY $63 FY02 FY11 Strengthened Balance Sheet Consolidated net debt to equity ratio improved to 0.84 at FY11 end from 1.65 at FY10 end. USD/ ` = (RBI reference rate as on ) 17

18 Agenda Overview (Group and JSW Steel) Performance Overview Projects Update Business Environment 18

19 Key highlights Production /sales Highest ever crude steel production in a quarter 1.94 Mn tonnes Highest ever sales volume in a quarter 1.91 Mn tonnes New product approvals Steel for Ball Bearing for FAG Schaeffler India Steel for transmission component for Heavy Commercial Vehicles for Tata Motors Iron ore update Total 11.4Mn tonnes of iron ore was sold out of 16.8Mn tonnes of iron ore offered for bidding in e-auctions till Dec 2011 end The company purchased 7.1Mn tonnes of iron ore in e-auctions and received 52% of it till Dec 2011 end 19

20 Production 3QFY12 11% 7% 19% 12% YoY % QoQ % YoY % QoQ % QFY11 3QFY12 2QFY12 Rolled : Flat 31% 7% YoY % QoQ % QFY11 3QFY12 2QFY12 All figures are in Mn tonnes Crude Steel 3QFY11 3QFY12 2QFY12 Rolled : Long 20

21 Production 9MFY12 7% 12% YoY % YoY % MFY11 9MFY12 Rolled : Flat % YoY % MFY11 Crude Steel 9MFY12 9MFY11 9MFY12 Rolled : Long All figures are in Mn tonnes 21

22 Saleable steel sales 3QFY12 20% 1% YoY % QoQ % % -2% YoY % QoQ % % YoY % 0% QoQ % QFY11 3QFY12 2QFY12 Rolled : Flat 3QFY11 3QFY12 2QFY12 Value Added 31% 7% YoY % QoQ % % 36% YoY % QoQ % QFY11 3QFY12 2QFY12 Total Sales 3QFY11 3QFY12 2QFY12 Rolled : Long 3QFY11 3QFY12 2QFY12 Semis All figures are in Mn tonnes 22

23 Saleable Steel Sales 9MFY12 27% 26% YoY % YoY % % YoY % MFY11 Rolled : Flat 9MFY12 9MFY11 Value Added 9MFY12 27% YoY % % YoY % MFY11 9MFY12 Total Sales 9MFY11 9MFY12 Rolled : Long 9MFY11 Semis 9MFY12 All figures are in Mn tonnes 23

24 Financials 3QFY12 (standalone) Particulars 3QFY12 3QFY11 Growth ` Crores USD mn ` Crores USD mn (%) Gross Sales 8,498 1,595 6,286 1,180 35% Net Sales 7,860 1,476 5,771 1,083 36% EBITDA 1, , % EBITDA (` per tonne) 6,568 6,328 Net Finance Charges % Depreciation % Exceptional Items NIL - Profit Before Tax % Tax (141) (26) Profit after Tax % USD/ ` = (RBI reference rate as on ) 24

25 Financials 9MFY12 (standalone) Particulars 9MFY12 9MFY11 Growth ` Crores USD mn ` Crores USD mn (%) Gross Sales 24,367 4,575 17,516 3,288 39% Net Sales 22,549 4,233 16,131 3,028 40% EBITDA 3, , % EBITDA (` per tonne) 7,210 7,324 Net Finance Charges % Depreciation 1, % Exceptional Items Profit Before Tax 1, , % Tax % Profit after Tax , % USD/ ` = (RBI reference rate as on ) 25

26 EBITDA movement standalone $ ` Crores/ USD mn $189 1,008 $ (677) (20) ($127) ($4) (66) (8) ($12) ($2) $235 1,253 EBITDA 3QFY11 Volume NSR Cost Mix Others FX impact EBITDA 3QFY12 USD/ ` = (RBI reference rate as on ) 26

27 Net debt movement standalone $2,273 12,106 $435 2,315 (1,081) ($203) $ (349) ($66) ` Crores/ USD mn $2,535 13,504 Net Total Debt as on Sep'11 New Loan Taken Repayments Forex Loss Movement in FD / MF Net Total Debt as on Dec'11 Cash & cash equivalent ` 2,201 Crores (USD 413 mn) USD/ ` = (RBI reference rate as on ) 27

28 Financial ratios standalone Particulars 3QFY12 3QFY11 EBITDA Margin 15.9% 17.4% PAT Margin 2.1% 6.6% Diluted EPS (`) 7.18* 16.97* ROCE 8.8% 9.2% * Not Annualized Particulars Net Total Debt/Equity (x) Net Total Debt/EBITDA (x)

29 Agenda Overview (Group and JSW Steel) Performance Overview Projects Update Business Environment 29

30 Projects summary Projects commissioned during 3QFY12 Alamatti Project : 171 km water pipe line from Alamatti Dam to Vijayanagar works Commissioned innov 2011 Slurry Pipe Line Project: A part of Beneficiation-2 Project Commissioned indec 2011 Projects under implementation Particulars CPP IV (300MWcaptive thermal power plant) Expected Completion FY12 end HSM 2 phase II Sep 2012 Beneficiation plant II (3modules out of 7 already commissioned) Sep 2012 Cold Rolling Mill 2 FY14 end 10 MTPA to 12 MTPA expansion FY14 end 30

31 Projects Update Alamatti Dam^ Slurry Pipeline^ CPP -IV (300 MW)* Cold Rolling Mill -2 (Phase 1)* ^ Commissioned * Work under progress 31

32 New projects Setting up cost reduction and integration projects for JSW Ispat in a SPV named Amba River Coke Limited (a wholly owned subsidiary of JSW Steel) Total cost of projects: ` 2,140 Crores Project Coke Oven Plant Pellet Plant CRM Mill Capacity 1 MTPA 4 MTPA 0.8 MTPA Project Cost ` 975 Crores (~$185 mn) ` 835 Crores(~$160 mn) ` 330 Crores(~$160 mn) Environmental Clearances In Place In process In process Implementation period Dec months from zero date 18 months from zero date Benefit to JSW Ispat Assured availability of good quality coke Improved productivity Assured supplies of pellets Reduce dependence on a few large customers Benefit to JSW Steel 25% return on investment 25% return on investment Larger share of valueadded downstream market USD/ ` = (RBI reference rate as on ) 32

33 Agenda Overview (Group and JSW Steel) Performance Overview Projects Update Business Environment 33

34 Global economy Global economic conditions remain a concern with Eurozone facing difficult credit conditions and fiscal policy uncertainty US economic data shows marginal but continuous growth despite significant headwinds Reconstruction spend in Japan spurring growth Asian economies face slow down but Chinese and Indian economies will still outperform Global economic growth in 2012 will be moderate compared to

35 Apr-08 Jul-08 Oct-08 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-10 May-10 Jun-10 Jul-10 Aug-10 Sep-10 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 HRC prices Global steel scenario Apparent steel demand growth in 2HCY11 has been lower compared to 1HCY11 Prices corrected in Oct-Dec 2011 driven by gradual de-stocking Capacity utilization has fallen below 75% pointing to supply side correction Crude steel production is down ~150 Mn tonnes on an annualized basis in Nov 2011 from its peak in June N.America domestic FOB US Midwest mill Europe import CIF S.European port Russia Black Sea export FOB China export FOB Shanghai World crude steel production (million tonnes) Capacity Utilisation (%) 88% 84% 80% 76% 72% 68% Global steel prices are showing improvement. Source: World Steel, SBB, JSW Steel 35

36 Jan/Nov'10 Jan/Dec'10 Jan/Feb'11 Jan/Mar'11 Jan/Apr'11 Jan/May'11 Jan/Jun'11 Jan/Jul'11 Jan/Aug'11 Jan/Sep'11 Jan/Oct'11 Jan/Nov'11 Oct-10 Nov-10 Dec-10 Jan-11 Feb-11 Mar-11 Apr-11 May-11 Jun-11 Jul-11 Aug-11 Sep-11 Oct-11 Nov-11 Dec-11 Jan-09 Apr-09 Jul-09 Oct-09 Jan-10 Apr-10 Jul-10 Oct-10 Jan-11 Apr-11 Jul-11 Oct China: moderate growth, seasonal re-stocking Cumulative FAI growth has been below 25% but still remains significant Steel production in Dec 2011 has fallen below Dec 2010 levels indicating exit of high cost capacities and lower apparent steel demand Gradual monetary policy loosening will ensure moderate growth in 2012 Urban Fixed assets investment (% YoY) Apparent Steel Consumption Finished Steel Production Inventories in the warehouses of 25 major cities 22 Re-stocking season Seasonal re-stocking should result in improved demand in 4QFY12. Source: Mysteel, World Steel Association, JSW Steel (All figures are in Mn tonnes) 36

37 Downward pressure on coking coal prices, volatility in iron ore prices 03-Jan Oct Jan Nov Dec Feb Jan Mar Feb Apr Mar May Apr Jun May Jun Jul Jul Aug Aug Sep Sep Oct Oct Nov Nov Dec Dec Jan Jan Australian Spot HCC FOB HCC Contract FOB HCC prices dropped to $ /t for 3QFY12 contracts but 3QFY12 steel margins would be softer due to lag effect of raw material prices. However HCC prices have come down to ~$ /t for 4QFY12 contracts and spot prices have corrected sharply to ~$220/t in Jan Indian Iron Ore 63% Fe dry -China CFR Iron ore spot prices, after falling to $126/t level in Oct 2011 end, are currently hovering around $145/t Iron ore prices have improved due to marginal re-stocking by Chinese players but upside is capped with reduced steel capacity utilization Margins to improve in 4QFY12 Source: SBB, Platts, JSW Steel (All figures are in USD/tonne) 37

38 India: steel consumption rebounds in 3QFY12 Current account deficit has widened to 3.7% in 2QFY12 and fiscal deficit is expected to rise to ~5-5.5% for FY12 High inflation coupled with higher interest rates and policy reforms delay has affected growth However HSBC India composite output PMI data suggests that activities in both the manufacturing and services sectors rebounded in Dec 2011 Apparent finished steel consumption* growth was low in 1HFY12, however it rebound in 3QFY12 and grew by 7.7% Finished steel production* growth corrected in 3QFY12 and increased by only 2.4% Steel prices remained flat in 3QFY12 vs. 2QFY12, and have increased in Jan 2012 Domestic steel prices are at import parity Apparent Finished Steel Consumption* 4.4% M FY % 3Q FY Finished Steel Production* 7.1% % M 3Q FY11 FY12 Steel demand growth is expected to be around 5% in FY12. Source: JPC, JSW Steel *Netted off for double counting effect 38

39 Forward looking and cautionary statement Certain statements in this report concerning our future growth prospects are forward looking statements, which involve a number of risks, and uncertainties that could cause actual results to differ materially from those in such forward looking statements. The risk and uncertainties relating to these statements include, but are not limited to risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, intense competition within Steel industry including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, our ability to commission mines within contemplated time and costs, our ability to raise the finance within time and cost client concentration, restrictions on immigration, our ability to manage our internal operations, reduced demand for steel, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which the Company has made strategic investments, withdrawal of fiscal/governmental incentives, impact of regulatory measures, political instability, legal restrictions on raising capital or acquiring companies outside India, unauthorized use of our intellectual property and general economic conditions affecting our industry. The company does not undertake to update any forward looking statements that may be made from time to time by or on behalf of the company. 39

40 Thank you 40