JSW Steel (JSWSTEEL) Q4 07/08 earnings summary

Executive summary

• FY08 crude steel output rose 37% to 3.626 Mt and saleable steel rose 27% to 3.400 Mt; SISCOL merger added a 1 Mtpa long-products facility.

• Standalone PAT increased 34% to ₹1,728.19 crore despite higher input costs; reported results include SISCOL from 1 Apr 2007 and are not directly comparable YoY.

• Acquisitions in the US and UK expanded value-added steel operations; mining concessions in Chile and Mozambique advanced the raw-material security strategy.

Financial highlights

• Gross turnover rose 36% to ₹12,628.91 crore; net turnover rose 33% to ₹11,420.00 crore.

• EBITDA increased 24% to ₹3,611.74 crore; PBT rose 30% to ₹2,484.12 crore and PAT rose 34% to ₹1,728.19 crore.

• Diluted EPS increased 19% to ₹94.18; basic EPS was ₹95.26.

• Consolidated turnover was ₹13,665.56 crore, EBITDA ₹3,739.59 crore and PAT ₹1,640.04 crore; PAT was lower than standalone mainly due to unrealized intercompany inventory profit.

• Adjusted operating EBITDA, excluding carbon credits, insurance claims, forex gains and non-operating income, was ₹3,393.87 crore, or 29.6% of net sales, vs ₹2,853.53 crore and 33.1% in FY07.

Outlook and guidance

• Capacity roadmap targets growth from 4.8 Mtpa to 18 Mtpa and 32 Mtpa by 2020; the stated long-term aim is 16% of India’s steel capacity.

• Vijayanagar crude-steel capacity expansion to 6.8 Mtpa was scheduled for Sep 2008, six months ahead of the original Mar 2009 date; expansion to 10 Mtpa was expected before Sep 2010.

• Phase II hot-strip-mill modernization to lift capacity to 3.2 Mtpa was expected by end-Q2 FY09; a new 3.5 Mtpa mill was scheduled for Sep 2009, with expansion to 5 Mtpa by Sep 2010.

• A 20 Mtpa beneficiation plant, in two 10 Mtpa phases, was planned by Mar 2010 at an estimated ₹850 crore; a further 300 MW captive power plant was planned by Oct 2010 at ₹825 crore.

• Indian steel demand was expected to grow over 12%; long-product demand was projected at 15% p.a. or more and flat products at about 12% p.a.