Steel consumption has grown 6%; seeing de-stocking in steel ind

Seshagiri Rao, Jt MD & Group CFO of JSW Steel said that 6% growth is seen in steel consumption. De-stocking is taking place in steel industry. Production is cut by 20% globally. He still see some pricing pressure internationally.

He further said that the company is not looking at raising equity, and has already tied up funding for capex. The QIP, if raised, will be used for debt reduction. He is seeing de-stocking in steel industry. Global steel production is down around 20%. He feels that JSW Steel should be able to achieve volume guidance. The company targets growth of 72% in production and 78% in sales. Hot strip mill will commission soon, he added.JSW Steel has enabling resolution to raise upto $ 1 billion via GDR/QIP etc. Rising demand for flat products is a positive for JSW Steel. The Flat to long products sales ratio for JSW Steel is 78:12. With stabilizing economy, the demand for consumer durables picks up. The company is banking on the same with tie up in place with the major OEMs. It has increased its exposure to rural market.

The company will benefit from lower coking coal and iron ore. However, carry over coking contracts at higher inventories still exists. JSW management is confident of delivering higer EBIDTA / ton due to lower raw material prices.

JSW Steel has revived its capex program of 10 mn tons at Vijaynagar complex from the current 6.8 mn tons. The incremental 3.2

mm tons will come up at an expenditure of Rs 6800 crore and will be ready by March 2011. The company had suspended the incremental capex due to the fall in the steel demand in Q309.

JSW Steel’s Debt to EBIDTA ratio is at 3.3x. Total debt is at Rs 14,600 crore. The debt covenants have been renegotiated. In its guidance for FY10, the company is expecting domestic ratio in exports to be 83:13 vs 60:40 now. The company has given aggressive guidance of volume growth of finished saleable steel of 78% at 6.4 ton (analysts are skeptical about how they will achieve this growth in current environment). Investment in Chile is differed by the company. The company will shut plate mill in US until prices revive (will continue pipe mill production). It feels that global markets will remain weak for next few quarters, so the focus will now be on India markets. The company does not expect steel prices to fall bellow $ 400/tn. It expects capacity utilizations to improve.

No related posts.