JSPL Q4FY18 results update

Quarterly numbers for Q4FY18

Results summary

1. Yearly basis, FY18 has seen all round improvement of EBIDTA, including Standalone steel, power and global operations
2. EBIDTA/t for steel positively surprised for Q4, as well as FY18 overall, despite the trade war concerns
3. Power EBIDTA margins dropped to 28% from 44% YoY on a quarterly YoY basis, due to drop in margin arising from issues around low coal availability leading to higher input costs of coal (up 40% YoY)
4. Appears global operations, ex. Shadeed, continues to remain red by around 500-600 Cr INR estimated
5. Steel volumes (sold and produced) were lower than estimated, leading to negative PAT overall
6. Standalone PAT became positive (after 13 quarters?)
7. Debt on the book remains high, around 40K (1.2K raised in Q4)

Conference call highlights

1. Expected India steel volumes for FY19 estimated to be 7MT (notes: Extrapolating Q4FY18 gives 1.72×4 = 6.88, so this may be realistic)
2. Exit NSR for Q4 was higher than average NSR for the quarter. Currently prices are stable. Assuming stable prices, Q1 EBIDTA could be higher than Q4
3. Management anticipates further 2000 rupees of cost reduction at angul at full capacity
4. Around 405 Cr debt paid in Q4. Around 4-5000 Cr additional reduction possible in FY19 (Math: Assuming, 8.75MT sale at 12500 rupees, EBIDTA = 11,000 Cr: minus, Bank payments ~ Rs 6000 Cr & 1000 Cr for capex = Rs 4000 Cr for debt repayments)
5. Capex for FY19 expected to be 900-1000 crores. Around 500 Cr residual capex for Angul + 400 Cr maintenance capex
Global operations
6. Management expects global ops, ex. Shadeed to be EBIDTA positive in FY19.
7. Mozambique is producing 100-120 t/m, Australia o/p is around 100t/m
Power business (JPL)
8. PPA is currently at 1350 MW (up from 1100 MW in FY18). Of this, 850 is LT and 500 is ST. Dicussions are on to tie up another 300 MW
9. 8.5MT coal is required for FY19. 50% expected to be supplied by coal India, 50% import. Coal availability dented margins in Q4 and remains a concern. Although situation is expected to improve as productivity of mines improve in May, June due to dry season. Also some closed mines were restarted
10. PLI expected to be 50% for FY19, with generation of around 1700-1900MW
Exceptional item
Exceptional expenses were 437 crores on consolidated & 194 cr standalone. Primarily expenses pertain to additional royalties that JSPL have been asked to pay in past. Out of the 437 crores, 137 crores pertains to past royalty expenses (demanded &) reported in Q3 pertaining to additional royalty demands on the Tensa mining operations. This part is cash expense. Balance 300 crores is non cash provisions, again pertains to variety of past royalty charges. Demands pertained to maybe several years’ additional royalty demands by the department and therefore has been classified it as an exceptional item.

Full Year Numbers for FY18