JSW Steel: Value Addition in Business Dr Vinod Nowal
Agenda 2
JSW Group - Overview India’s leading integrated steel producer (18.0 MTPA capacity) Engaged across the value chain of power business (Operates 4,531 MW) Portland Slag Cement /Ground Granulated Blast-furnace Slag Cement plant (6 MTPA capacity) Engaged in development and operation of ports, terminals etc (Operating Venture capital arm capacity 33 mn T) USD 11 billion group with presence across the core sectors USD 11 billion group with presence across the core sectors
The Growth of JSW Steel Post-merger Post-merger of ISPAT of ISPAT 18.0 (now Dolvi) (now Dolvi) Post-merger Post-merger 14.3 Vijayanagar of SISCOL of SISCOL Plant - India’s (now Salem) (now Salem) largest Steel 7.8 Plant at single 4.8 location 1.6 2.5 0.8 2008 2009 1999 2001 2004 2013 2016 2016 4
Focusing on all aspects of Business Excellence Productivity Throughput Maximisation India’s only steel plant in Quality First time right production Top 10 global company listing Cost Low Conversion Cost by WSD Delivery Just in Time Morale Employee engagement Safety Safety Starts from me Eco Friendly Production Environment 5
Operations – Summary 5 years CAGR 5 years CAGR 5 years CAGR 5 years CAGR growth @14.3% growth @14.8% growth @14.3% growth @14.8% Highest ever monthly Crude Steel production (1.27 mn tonnes) in March 2016 6
Financial Performance – Summary Operating EBIDTA declined in FY15-16 (Rs 5,723 Cr) against FY14-15 (Rs 8,872 Cr) due to sharp drop in net sales realization owing to dumping of steel by steel surplus countries 7
Agenda 8
JSW Steel – Competitive Edge 1 Project Execution capability 2 6 Cost Leveraging Operational competitiveness advantages from acquisition 5 Flexible operations Product portfolio Use of cutting-edge 4 3 technology 9
Project Execution Capability 1 5000 • Execution Speed Rs Cr / million tonnes • Economy of Scale 10 Capital cost mtpa • In-house Project Management 3.3 4000 PSU competition - 10 mtpa mtpa expansion started in 2007 PSU competition - 3.3 mtpa expansion (> Rs 45,000 Cr ) in 2015 (Rs 12,291 Cr) 3000 (Begin in 2005 with Rs 8,692 Cr ) 1.8 1.7 mtpa mtpa 1 Private competition - 2000 mtpa 1.8 mtpa expansion in JSW Dolvi - 1.7 mtpa Private competition 2008 expansion in 2015 - 1 mtpa expansion (Rs 4,555 Cr ) ( Rs 4,300 Cr) in 2005 (Rs 2,000 Cr ) 2005 2010 2015 Source: Company’s Annual Report 10
Our differentiated GROWTH model months CAPEX Execution time (Months) Decision-making Faster Cash Faster Project Capability Execution Cycle Generation ▪ First mover advantage ▪ Rs ▪ Faster learning curve 3-3.5K/t building of capacity (6-10K/t for ▪ Faster ramp up of facilities ▪ Faster drawing board competition) time ▪ Higher asset utilization ▪ In-house capability to select levels ▪ Fast decision-making technology on turn-key ▪ Fastest return on basis ▪ Faster Concept-to- Investment (ROI) ▪ Utilizing slowdowns to build execution cycle time capacity 11
Cost Competitiveness 2 Through integration of facilities, extra cost-saving initiatives over Annual Business Plan 12
Global Economic Slowdown 2008 Onset of global meltdown led to slowdown on construction sector Fall in steel demand led to fall in Prices � Drastic cost-cutting measures and drop in raw material prices led to cost reduction � Blast Furnace III (2.7 MTPA), then largest in India was commissioned in Feb 2009 Leading steel manufacturer with upturn in economy (10 MTPA by 2010-11) 13
Iron Ore Crisis Management What should the Strategy be, going forward ? 14
Then emerged the two-pronged strategy.... Grade wise market-inventory analysis for short-term Getting Supreme court Sourcing Iron Ore permissions for restarting ore buy from Multiple Identifying other low grade sources for the long-term sources Working towards getting mines re-opened Beneficiation system re-design Solid waste utilisation measures Redesigning plant Optimising operations of operations for above Agglomerates (Pellet+Sinter) Establishing new operating regime of iron-making operations Stabilising at the new steel- making chemistry 15
Slowdown due to Unfair imports - 2014 Cheap, unfair imports sourcing from surplus markets particularly China Prices fell down drastically due to fall in demand Cost-cutting measures through SADHYA and DEEP DRIVE resulted in cost reduction 16
Special Cost Reduction Drive – Example of Vijayanagar Over and above Annual Over and above Annual 407 / 445 1026 / 1544 SADHYA (FY15) DEEP DRIVE (FY16) Business Plan Business Plan DEEP DRIVE 17 Target – Rs 1,017 crores 17
Attaining Cost Leadership – Example of Dolvi Plant Pellet Plant Backward LCP 3 13 % ↓ Integration in HRC Cost 2010 I 2011 I 2012 I 2013 I 2014 I CPP Coke Oven 18
19 Product Portfolio 3 Steel making capacity of 18 Mtpa 7 manufacturing facilities in India HSM HR Coils Plates VASIND / TARAPUR HRPO KALMESHWAR Hot Rolled Coils Plates DOLVI & SALAV Coated Long VIJAYANAGAR Products Products Cold Slabs Rolled SALEM CA,GL Integrated Steel Plant Downstream Plant 19
JSW’s Indigenisation SWOT Analysis to SWOT Analysis to opt for Indigenization opt for Indigenization GRADE HR Substrates HR Cost � Customer � Double acceptance approval JFE Substrates 1.6 times of X � Defect free � High 440 W substrate substrate x JSW Substrates cost JFE Substrates 1.6 times of Y 270 IF Y JSW Substrates � High lead � Japanese time customers � Inflexibility in � Leveraging REQUIRED ADDITION OF FACILITIES operation skill of JFE New Hot #1~4 #6.7.8 KR 3BF RH Scarfing BOF Caster 4BF HSM2 Manual to S < 20ppm C<15PPM Sublance Auto 20
JSW Auto Products: Making India Self Reliant JSW is the only JSW is the only Indian Company Indian Company to supply to supply complete Auto complete Auto Product Range Product Range to the to the Automotive Automotive Customers Customers 21
ELITE CUSTOMERS ELITE CUSTOMERS 22
Special Grade Steel All Auto majors Advanced High Advanced High Strength Steel Strength Steel Real Crompton, Earthquake- Earthquake- Electrical grade Electrical grade estate Godrej, Microtec resistant steel resistant steel steel (CRNGO) steel (CRNGO) firms Thick Plate via HSM Thick Plate via HSM L&T L&T Ship-building Ship-building route for high Special Grade Steel Special Grade Steel route for high grade steel grade steel strength in strength in Construction sector Construction sector Steel for Hydraulic TPI, Steel for Hydraulic Pennar LPG grade steel Cylinder – for auto LPG grade steel Cylinder – for auto Line Pipe Steel for Line Pipe Steel for sector application Sangbhi Cylinders sector application Sub-Zero Sub-Zero Jindal Saw, Welspun application application 23
New Product development: JSW’s Future Growth Driver JSW JSW VAI JFE GA/GI Arcelor POSCO Indian Salzgitter Competition Salzgitter POSCO VAI CRCA JFE NUCOR Indian JSW JSW Competition JSW JSW JFE VAI HR Arcelor Salzgitter Indian Nucor Competition TATA (UK) Salzgitter-Germany Nucor-USA TATA-Europe 24
4 Use of Cutting-Edge Technology – Strategic Alliances Alliances Strategic Collaboration with JFE-Japan for � Smooth technology transfer � Plant performance improvement � Developing high-end automotive grades � JV with Vallabh Steels for Tin-plate � JV with Marubeni Itochu for Service Centres (Pune, Palwal) � Acquisition of Welspun Max Steels (Salav) of 0.9Mtpa � JV with Severfield for pre-engineering buildings 25
Flexible Operations 5 26
Solid Waste utilisation - Overall approach Future 88% Present 88% 76% B C D D A B C A 3500 TPD 300 Crs / year 3500 TPD 300 Crs / year Substitutes 5% Raw materials requirement Substitutes 5% Raw materials requirement 27
Leveraging Operational Advantages from Acquisition 6 � Southern Iron & Steel Company Ltd (SISCOL), � Augmentation of existing facilities with investment auto grade steel maker was ailing over INR 10 crores (US$ 2 million) to make the plant Turnaround assets – JSW Turnaround assets – JSW � Huge cash losses resulted in severe financial yield 0.3 million tonnes rated capacity, never achieved crisis since inception � Accumulated losses of more than INR 350 � Putting up captive power plants and coke oven plant crores (US$ 50 million) to ensure cheap power and coke to reduce costs � Usage of all waste gases as fuel � Increasing special steel production to 40% and adding more value-added products to the product mix � Expansion of production capacity to 1.0 mn tonnes � Company first time earned net profit during 2006-07 � Lenders turned to JSW Group to take over � Now one of the major supplier to automobile hub in Salem Salem Chennai Strategic leadership to turnaround acquired loss-making assets
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