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Jindal Steel & Power release financial results

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World Coal,

Jindal Steel & Power Ltd (JSPL) has released its financial results for the fourth quarter (4Q21) and fiscal year 2020 – 2021 (FY21).

Strong momentum witnessed in 9M21 by JSPL continued in 4Q21 with the company achieving record production, revenues and profitability during the quarter. JSPL has ended FY21 on a strong note with consolidated EBITDA hitting a record of Rs.14 444 crore and the company reporting a net profit (Rs. 5527 crore) after losses reported in the past 6 years.

Solid operational performance, divestment of non-core assets and lower CAPEX have all contributed in JSPL continuing on the path of deleveraging with net debt declining sharply from Rs. 35 919 crore in FY20 to Rs. 22 146 crore in FY21. As a result, JSPL’s balance sheet is now the strongest in the sector. The company in its endeavour to become net debt free has made substantial prepayment of Rs. 2462 crore in early May. Net debt has declined to Rs.10 589 crore on standalone basis and Rs.19 332 crore on consolidated basis (as on 11 May 2021). Strengthening balance sheet coupled with strong upcycle witnessed in steel prices have led to JSPL’s credit rating enhancement to A from BBB- within a span of 4 months.

Proposed divestment of Jindal Power Ltd (JPL) will further boost JSPL’s balance sheet. In addition, the divestment would also reduce JSPL’s carbon footprint by almost half and propel the company towards becoming net debt free – a rare feat in the steel sector, historically associated with high leverage and stretched balance sheet.

JSPL: Next phase of growth

The core focus right now is to sweat out assets and make JSPL net debt free. Thereafter, the company will be embarking on a journey to expand its profitability and volumes via the Angul expansion from 6 million tpy to 12 million tpy taking JSPL’s overall steel capacity to approximately 16 million tpy in India. Rich from its experiences and learnings of the past decade, the company plans to tread on this next phase of growth in a measured way by not deviating from the two key guard rails:

  1. Keeping net debt to EBITDA below 1.5x during all times.
  2. Keeping sustainability – of financial and environment, social, and governance (ESG) matrices – at the forefront.

The projects undertaken in our next phase of growth can be broadly bucketed under two categories:

Volume expansion

JSPL is all set to double its steelmaking capacity at Angul, Odisha to approximately 12 million tpy (from 6 million tpy currently), raising its India crude steel capacity by 66% to approximately 15.9 million tpy. Key projects driving volume expansion at Angul include 4.25 million tpy blast furnace (BF), 2.7 million tpy direct reduced iron (DRI) and 6.3 million tpy steel melt shop (SMS) broadly replicating the present facilities at Angul. It will take the company around 30 months to commission the 4.25 million tpy BF-BoF, with commissioning expected starting December 2023. This will be followed by 2.7 million tpy DRI plant, with commissioning expected in February 2025. These projects along with the related raw material capacities (2 million tpy coke oven, oxygen plant etc.) will account for almost two-thirds of the planned Rs. 18 000 crore CAPEX.

Margin expansion

In its endeavour to become one of the highest margin steel producers globally, JSPL intends to further reduce costs and improve its product mix at Angul. JSPL plans to construct a slurry pipeline between Barbil-Angul (200 km) in conjunction with 12 million tpy pellet plant in Angul (2 phases of 6 million tpy each), which would reduce iron ore logistic costs and bring in additional cash flows from pellet sales. The first phase of the pellet plant is expected to get commissioned in September 2022 and Phase-2 will be commissioned a year later (September 2023). In order to improve its product mix, JSPL is also planning to construct a 5.5 million tpy hot strip mill (HSM), which will significantly increase the company’s flat steel making capacity from 2.2 million tpy currently to 7.7 million tpy. These margin expansion projects of both backward and forward integration account for the remaining one-third CAPEX and have a strong IRR delivering a short payback period.

JSPL Standalone Performance

4Q21 performance

During 4Q21, JSPL Standalone reported highest ever steel production volumes (including pig iron) at 2.07 million t (up 35% y/y) and sales of 1.91 million t (up 37% y/y). Lucrative export markets incentivised the company to raise its share of exports to 27% in 4Q21 (vs 21% in 3QFY21).

Steel prices continued their upward momentum during the quarter. However, secondary rebar prices witnessed a sharp decline for a brief period in the beginning of the quarter before recovering. Rising steel prices, improved mix and higher volumes helped JSPL Standalone report a record EBITDA of Rs. 4884 crore. Strong operating profit and declining interest costs have resulted in JSPL standalone posting its highest ever quarterly profit of Rs. 3426 crore. However, sharp rise in iron ore prices coupled with increase in prices of electrodes, alloys, refractories, and other such raw materials continue to exert downward pressure on margins.

Pellet production in 4Q21 increased 7 % y/y. External sales of pellets however reduced to 0.29 million t (down 38% y/y) due to higher internal consumption as production ramps up.

FY21 performance

Notwithstanding the massive disruption caused by the pandemic in early FY21, JSPL’s wide product profile and geographical diversification stood the company in good stead helping JSPL report higher production and sales y/y in 1Q21. As the economy gradually unlocked, the steel demand and prices have continued to boost company’s volume with the production rising in each successive quarter. For the full year, standalone production (including pig iron) increased by 19% y/y to hit a record of 7.51 million t (vs 6.3 million t in FY20) while standalone steel (including pig iron) sales also reached the highest ever level of 7.28 million t (up 20% y/y). Better export markets during the year resulted in JSPL exports rising by 226% to 2.53 million t in FY21, accounting for 35% of the overall sales (vs 13% in FY20).

After hitting a bottom in June 20 quarter, the steel prices have seen a sharp recovery with NSR’s rising consistently in every quarter. Improving prices, higher volumes and better cost efficiencies have resulted in JSPL Standalone EBITDA hitting a record of Rs.13 055 crore. Record operating profit and declining interest expense have contributed in JSPL net profit reaching the highest ever level of Rs. 7154 crore in FY21.

The pellet operations at Barbil also reported record production of 7.76 million t in FY21 (vs 7.28 million t in FY20). However, with ramp up of the India steel operations, external sales of 2.25 million t were lower (-5% y/y).


4Q21 performance

Improved power demand and coal availability led to JPL reporting generation of 3972 million units in 4Q21 (+63% y/y).

Given the pent up demand there was some benefit of higher pricing on the spot exchanges and increased volumes were largely offset by higher coal and other costs with JPL reporting an EBITDA of Rs. 345 crore (up 17% y/y). The costs were also impacted by certain disruptions in few of the units because of high ash congestion and ensuing breakdowns. Units are scheduled for substantial overhaul in the coming quarters.

The Ministry of Coal (MoC), government of India had declared JPL as the successful bidder for Gare Palma IV/1 coal mine. However, the company is still waiting for the vesting order from MoC before it can take control of the mine which has been delayed by several months owing to the ongoing pandemic.

Full year FY21 performance

On an annual basis, JPL generated EBITDA of Rs. 1318 crore (up 9% y/y) primarily driven by higher volumes and improved spot pricing. The generation for FY21 stood at 13 075 million units compared to 9583 million units for FY20. Post the opening up of lockdowns earlier in the year, the sector benefitted from pent up demand as manufacturing activity picked up and coal stocks were easily available.

JPL divestment is a game changer: After running an exhaustive sale process that lasted for 4 months, where the company approached 33 potential buyers, JSPL recently proposed divestment of JPL to Worldone Private Ltd for an all cash equity value consideration of Rs. 3015 crore. Post JPL divestment, JSPL will transform into a pure play steel company with all its operations in India – one of the highest growth economies globally. The divestment will significantly help JSPL reduce emissions improving ESG score, strengthen its balance sheet via debt reduction, shift entire management focus on company’s strong domestic steel business and improve return ratio’s for its investors as the company progresses towards becoming a net debt free company. The proposed sale is subject to necessary approvals of shareholders of the company, regulatory approvals, approvals from lenders of the company and target company, contractual approvals and such other approvals, consents, permissions, and sanctions as may be necessary in line with extant relevant guidelines. The long stop date for completion of the proposed sale is 12 months.

Global ventures


Chirodzi mine produced 811 000 t rate of mine (ROM) (up 37% y/y) in 4Q21.The Mozambique operations continued to ramp up production this year and ended FY21 at 3.22 million t (up 29% compared to 2.5 million t in FY20). Mozambique operations reported EBITDA at US$0.48 million for 4Q21 and US$0.43 million for FY21.

South Africa

During 4Q21, Kiepersol mine in South Africa produced 135 000 t ROM (up 41% y/y). The mine operations continued to ramp up ending the year with a production of 622 000 t ROM (up 43% y/y) for FY21. The mine reported EBITDA of US$0.77 million for the quarter and US$6.09 million for the year (vs US$4.18 million in FY20).


Both Wongawilli & Russell Vale mines continue to remain under care and maintenance. The development application for the Russell Vale Revised Preferred Underground Expansion Project (UEP) has been approved by the Independent Planning Commission of NSW (IPC) subject to certain conditions. Environmental Protection and Biodiversity Conservation (EPBC) referral is currently under process. The company is aiming to restart coal shipments in 2Q22.


Structural changes in China to curb steel exports (removal of export rebate), strong focus on reducing carbon emissions, and ongoing geopolitical tensions are likely to provide continued support to current steel upcycle, in our view. India however is currently facing threat from the ongoing second wave of COVID-19, which has turned out to be much severe compared to earlier wave. JSPL remains committed to prioritising human lives in these challenging times and has been diverting oxygen supply to various states (daily run rate has been increased to 120 t recently from 100 t). JSPL is providing liquid medical oxygen to the states of Telangana, Maharashtra, Andhra Pradesh, Gujarat, Odisha, Chhattisgarh, Madhya Pradesh, Delhi, and Haryana. While slowdown in construction activities within the country and diversion of oxygen supply has resulted in lower production and sales recently, strong export markets due to change in Chinese policies and ongoing vaccination drive involving country’s broader population bode well for steel demand and pricing outlook in FY22 and beyond.

Outlook for Indian steel producers has turned extremely bright in the past year and JSPL’s decision to divest power assets (JPL) is in line with its renewed strategy to focus on the company’s promising India Steel operations.

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