15 Things SteelMint Learned from JSW Steel Q2 FY20 Results

1. Crude steel output down by 9% Q-o-Q in Q2 FY20- JSW steel's crude steel production tumbled by 9% to 3.84 MnT in Q2 in comparison with 4.24 MnT in Q1.

Planned shutdowns during the quarter amid weakening domestic steel demand along with disruptions at Dolvi Works caused by prolonged monsoon resulted to fall in crude steel output on quarterly basis.

However, the production inched down by 3% and stood at 8.08 MnT in H1 FY20 over 8.30 MnT in the H1 FY19.

2. Saleable steel sales fell by 4% Q-o-Q in Q2 FY20- The producer's saleable steel sales witnessed a fall of 4 % to 3.6 MnT in Q2 owing to seasonal slowdown and weakening sentiments in the domestic market over falling prices. In Q1 the figures were 3.75 MnT.

Meanwhile, the saleable steel sales declined by 6% to 7.35 in H1 FY20 in comparison with 7.79 MnT in H1 FY19.

3.Company’s operating EBITDA slashed by 25% Q-o-Q in Q2 FY20- The company's standalone operating EBIDTA stood at INR 2,796 Cr fell by 25% against preceding quarter.

4.Hike in company’s exports by 76%  in Q2FY20- In Q2FY20 company’s exports reported spiked by 76% on quarterly basis to 1.09 MnT which was 0.62 in previous quarter.However the same surged by 68% in Q2FY20 which was 0.65 MnT in same time frame of previous year.

5.JSW cuts production & sales Guidance in H2FY20- Company plans to achieve production and sales guidance to 97% in H2FY20 amid cost benefits.However in FY20 company announced sales guidance at 16 MnT and production guidance at 17MnT in FY20.

6.Expect demand to pick up in H2 FY20 - Weaker automotive sales volumes and consumer durable sales in recent months is a matter of concern.Having said that a modest recovery is expected on the back of festivity demand and various initiatives of govt. to facilitate credit availability in the system. Govt has undertaken series of measures like reduction in corporate tax rate, GST refunds etc.We have noticed uptick in rebar and wire rod demand in last few weeks. Also demand from piping and solar sector has moved up and credit flow has started coming in

7.Monnet Ispat pellet & DRI production fall - Pellet production at Monnet Ispat & Energy stood at 410,000 MT and DRI production of 182,000 MT in Q2 FY20. Pellet production from Monnet was recorded at 431, 000 MT and DRI production of 215,000 MT in Q1 FY20.

8.Lower operating cost drivers of Q2 FY20- Lower cost of key raw materials like iron ore and coal, Ferro alloys and electrode costs and Power, fuel costs and consumables decreased with lowering energy prices.

9.Retail sales decline in Q2FY20- Overall retail sales declined by 19% YoY on the back of sluggish domestic demand and tight liquidity conditions across the value chain.Share of Branded products increased to 52% vs 46% in Q2 FY19

10.Merger of 4 subsidiaries - Pursuant to amalgamation scheme approved by the Honorable NCLT, the wholly owned subsidiaries of the company - Dolvi Minerals & Metals Private Limited, Dolvi Coke Projects, JSW Steel Processing Centre and JSW Steel (Salav) merged with the company wef 01 Sept'19.

11.Blended NSR decline in Q2FY20- Blended Net Sales realizations went down on yearly basis driven by lower domestic steel prices and higher share of exports.Thus prices have bottomed out and is expected to remain stable this quarters.However with the correction in raw material prices like coking coal and iron ore  from own captive mines will further flow in upcoming quarters.

12.Govt initiatives for steel sector- Steel Import Monitoring System- SIMS to monitor real time import data on quality, quantity and value in order to prevent import of defective steel and arrest circumvention of mis-classification,mis-declaration and avoid under / over-invoicing. Anti-dumping duty ranging from $28-200/t implemented on Galvalume products wef 15th Oct. Also Draft Steel Scrap Policy to promote circular economy via resource conservation, energy efficient and low carbon foot print.

13.JSW coated products output up in Q2FY20- JSW coated products output stood at 0.42 MnT in Q2FY20 which was 0.43 MnT in previous quarters.

14.Iron ore production from captive mines up 58% Q-o-Q - Production of iron ore from JSW captive mines at 1.25 MnT in Q2 FY20 up 58% Q-o-Q. In H1 FY20 production was recorded at 2 MnT. JSW Steel proposed reduction royalty from 15% to 5% on low grade Iron ore fines.

15.Regarding ongoing NCLT case of Bhushan Power & Steel and Vallabh Industries - NCLT case hearing for Bhushan Power & Steel is posted on 25 Oct'19. Regarding Vallabh Industries, the argument is complete but judgement is reserved.