Release Date: August 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Steel Authority Of India Ltd (BOM:500113, Financial) reported an EBITDA of INR2,420 crores, an improvement of around 16% over the corresponding period last year.
- The company has made steady progress in operational efficiency, reducing coal-coke consumption, increasing the use of CDI, and improving BF productivity.
- Domestic sales have grown by 5%, indicating strong demand within the country.
- The company is optimistic about future margins due to government infrastructure spending and efforts to reduce costs by diversifying coal sources.
- Steel Authority Of India Ltd (BOM:500113) is planning significant capacity expansions, including a new 4 million tonne plant at IISCO and de-bottlenecking schemes to increase capacity by 3 million tonnes over the next three to four years.
Negative Points
- The company has experienced a significant increase in debt, rising by around INR5,000 crores during the quarter, primarily due to accumulated coal stocks and increased inventory.
- Export sales have registered a substantial decline, impacting overall sales volumes.
- The price of steel has softened in the international market, which may impact margins.
- The company has faced challenges with the shutdown of the hot strip mill at Bokaro, affecting production and sales volumes.
- There is uncertainty regarding future steel prices, with declines observed in July and August, which could further impact revenue and profitability.
Q & A Highlights
Q: What was the coking coal cost in this quarter, and how much decline do you expect in Q2?
A: The coking coal cost during this quarter was around INR24,500 per tonne for imported coal and INR13,500 per tonne for indigenous coal, averaging to INR23,000 per tonne. We expect it to remain in a similar range in Q2 due to existing inventory.
Q: Why has the debt increased significantly compared to last quarter, and when can we expect this to reduce?
A: Debt increased by around INR5,000 crores due to accumulated coal stocks and increased inventory of finished and semi-finished steel. We expect to reduce this by December or January as we liquidate these stocks.
Q: What is the outlook on the semis mix, and how do you plan to manage it?
A: The semis mix will remain mostly at the same levels. We aim to maximize conversion through agents and wet leasing. The expansion plans, including new mills, will reduce the proportion of semis over the next 3 to 3.5 years.
Q: What is driving the reduction in coke rate, and will it remain at this level?
A: The reduction in coke rate is driven by improved operational efficiencies, better quality of iron ore, and increased CDI rate. We plan to further reduce the coke rate in the coming months.
Q: Can you provide details on the CapEx projects currently under execution?
A: We are working on de-bottlenecking schemes, including revamping the blast furnace at Durgapur and adding casters at Rourkela and Bhilai. We aim to increase capacity by 3 million tonnes over the next 3-4 years with an investment of INR10,000 to INR11,000 crores.
Q: What is the blended NSR for Q1, and how do you see it trending in Q2?
A: The NSR for Q1 was around INR53,700. It declined by INR500 to INR600 in July and is expected to decline further in August by around INR1,000 to INR1,500.
Q: What are the expansion plans for IISCO, Bokaro, and Durgapur, and their respective costs?
A: The IISCO plant expansion is a 4 million tonne project with an estimated cost of INR37,000 crores. Bokaro will be ramped up to 7 million tonnes, and Durgapur will increase by around 1 million tonnes. The costs for Bokaro and Durgapur are still being evaluated.
Q: How will the recent Supreme Court judgment on state levies impact SAIL?
A: We are already paying certain state-related taxes in Chhattisgarh and Madhya Pradesh. Jharkhand has announced a new levy, which will have a prospective impact of around INR150 to INR200 crores. We are awaiting further clarity on Odisha.
Q: What are the volume targets for this year?
A: We are targeting a crude steel production of around 20.87 million tonnes and sales volume of around 19.26 million tonnes for this year.
Q: How do you plan to fund the expansion given the current debt levels?
A: We are reassessing our cash flows and debt-to-equity ratio in light of current market conditions. We aim to manage the expansion without significantly leveraging our balance sheet.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
