Q3, FY 2009 2 Agenda Global Outlook % Fall in Baltic dry and - - PDF document

Q3, FY 2009

Agenda

2

Source: IMF/Bloomberg/ UN report on WESP 2009

GDP Growth Est. for 2009

(% change) 3 % Fall in Baltic dry and Commodity Indices (Oct-Dec 08)

Unemployment rate

(% of total labor force)

2009 to be a year of Challenges

Global Outlook

Source: Bloomberg, IMF, Fxstreet.com

TED Spread

(%)

Emerging market sovereign bond spread 4

TED spread is the difference between the interest rates on interbank loans and short term U.S. government debt ("T-bills").

bps

Central Banks Have Responded With Coordinated Global Rate Cuts (%)

IIP growth still positive for India and China

Glimmers of Hope: Improving liquidity, risk appetite, reduced interest rates and +ve IIP growth for Chindia

% YoY (Nov/Dec08)

Global Economy

5

Total Stimulus Package amounts to ~ 2.6% of World GDP & more tranches could follow

Economic Stimulus package - Worldwide

Steel Scenario

6

World crude steel production 2008 (MnT)

Source: IISI/SBB/Mysteel

Supply side Correction 7 30% fall from the peak level

55% 51% 55%

> 50% from the peak level Fall in Steel Prices

Supply side measures, Steel price correction & bottoming out inventory set the stage for demand improvement

30%

China : Dealer Inventories and HRC Prices Demand seems to recover in China

($/ton) China: Crude steel production (Mnt)

RMB/t 0,000 tonnes

Apparent steel demand to recover

Raw Material spot prices ($/ton) Coking coal contract prices ($/ton) Iron ore contract prices ($/ton)

Source: IISI/SBB/Bloomberg

8

60% 50% 65% 55% 63%

Price fall arrested

$/ton

Fall in spot raw material prices, expected correction in contract prices & arrest of finished steel price decline to improve margins for steel companies.

Margins poised to improve

9

• Govt. takes proactive measures to support steel industry

INDIA: Govt. Measures (Oct-Dec08)

10

Crude Steel Production (MnT) Imports of finished steel (Mnt) Apparent Finished Steel Consumption (Mnt)

Declining attractiveness of import will lead to higher demand for Indigenous steel

Source: IISI/JPC

Exports of finished steel (Mnt)

India: Steel Demand-Supply Scenario

Performance highlights…

11

12

Highlights – Q3 FY09

Particulars Particulars Q3 Q3

Volume : Crude Steel Production Volume : Crude Steel Production ‐ ‐ 18 % 18 % : Saleable Steel : Saleable Steel ‐ ‐ 18 % 18 % Net Sales Net Sales ‐ ‐ 1 % 1 % Blended : Sales Blended : Sales Realisation Realisation 16 % 16 % : Cost of Production : Cost of Production 51 % 51 % EBITDA Margin EBITDA Margin

15.3 % 15.3 %

EBITDA before exceptional items EBITDA before exceptional items

Rs

• Rs. 433 Cr.

. 433 Cr.

Forex Forex Loss Loss

Rs

• Rs. (177) Cr.

. (177) Cr.

Net Profit / (Loss) Net Profit / (Loss)

Rs

• Rs. (128) Cr.

. (128) Cr.

(YoY) Weighted Avg. Cost of Borrowing 8.29%

13

Production – Q3 FY09

Q3 '08, 0.956 Q3 '09, 0.782 Q2 '09, 1.001 0.2 0.4 0.6 0.8 1 1.2

Crude Steel

YoY % QoQ %

‐ 18% ‐ 22%

Q3 '08, 0.746 Q3 '09, 0.622 Q2 '09, 0.723 0.55 0.6 0.65 0.7 0.75 0.8

Rolled : Flat

YoY % QoQ %

‐ 17% ‐ 14%

Q3 '08, 0.082 Q3 '09, 0.082 Q2 '09, 0.069 0.06 0.065 0.07 0.075 0.08 0.085

Rolled : Long

YoY % QoQ %

0% + 20%

Q3 '08, 0.216 Q3 '09, 0.266 Q2 '09, 0.223 0.05 0.1 0.15 0.2 0.25 0.3

CR / CRCA

YoY % QoQ %

+ 23% + 19%

Q3 '08, 0.19 Q3 '09, 0.197 Q2 '09, 0.157 0.05 0.1 0.15 0.2 0.25

GI / GL

YoY % QoQ %

+ 4% + 25%

All fig. in Million Tonnes

14

Saleable Steel Sales – Q3 FY09

Q3 '08, 0.867 Q3 '09, 0.711 Q2 '09, 0.837 0.1 0.2 0.3 0.4 0.5 0.6 0.7 0.8 0.9 1

Total Sales

YoY % QoQ %

‐ 18% ‐ 15%

Q3 '08, 0.487 Q3 '09, 0.331 Q2 '09, 0.367 0.1 0.2 0.3 0.4 0.5 0.6

HR Coils & Plates

YoY % QoQ %

‐ 32% ‐ 10% Rolled : Long

YoY % QoQ %

+ 14% + 52%

Q3 '08, 0.091 Q3 '09, 0.06 Q2 '09, 0.203 0.05 0.1 0.15 0.2 0.25

Semis

YoY % QoQ %

‐ 34% ‐ 70%

Q3 '08, 0.22 Q3 '09, 0.241 Q2 '09, 0.215 0.2 0.205 0.21 0.215 0.22 0.225 0.23 0.235 0.24 0.245

Value Added (CR/GI/PPGI)

YoY % QoQ %

+ 9% + 12%

Q3 '08, 0.069 Q3 '09, 0.079 Q2 '09, 0.052 0.01 0.02 0.03 0.04 0.05 0.06 0.07 0.08 0.09

All fig. in Million Tonnes

15

Sales Realisation v/s Cost of Production – Q3 FY09

Q3 '08, 30230 Q3 '09, 34946 Q2 '09, 46569 5000 10000 15000 20000 25000 30000 35000 40000 45000 50000

Blended Realisation (Rs. / t)

YoY % QoQ %

+ 16% ‐ 25%

Cost, 20832 Cost, 29446 Cost, 33621 FX Loss, 2577 FX Loss, 1747 FX Loss, ‐ 179 ‐5000 5000 10000 15000 20000 25000 30000 35000 40000 Q3 '08 Q3 '09 Q2 '09

Blended Cost (Rs. / t)

YoY % QoQ %

+ 51% ‐ 14%

20,653 31,193 36,198

FX Gain,

16

Iron Ore Price Movements – Q3 FY09

YoY % QoQ %

‐ 52 % ‐ 63 %

Q3 '08, 2042 Q3 '09, 982 Q2 '09, 2665 500 1000 1500 2000 2500 3000

QoQ YoY Rs / t cs 3,693 3,693 1,705 1,705 Total (Rs Cr) 212 212 133 133 Q3 ’08 Q3 ’09 Q2 ’09 China FOB ($) 185 185 75 75 159 159 % Change ‐ ‐ 59 % 59 % ‐ ‐ 53 % 53 %

Rs./Ton

17

Operating Parameters (Vijayanagar) – Q3 FY09

Q3 '08, 680 Q3 '09, 628 Q2 '09, 637 600 610 620 630 640 650 660 670 680 690

Fuel – Blast Furnace

YoY % QoQ %

‐ 8% ‐ 2% Cost Impact

QoQ YoY Rs per t cs 527 527 1,006 1,006 Total (Rs Cr) 35.20 35.20 67.20 67.20 54.52% 94.20% 66.30% 45.48% 5.80% 33.70% 0% 10% 20% 30% 40% 50% 60% 70% 80% 90% 100% Q3 '08 Q3 '09 Q2 '09 Own Bought

Coke Consumption Cost Impact

QoQ YoY Rs per t cs 1,368 1,816 Total (Rs Cr) 91.38 121.3

Q3 '08, 306 Q3 '09, 309 Q2 '09, 340 280 290 300 310 320 330 340 350

Fluxes Consumption Sinter + Bfc

YoY % QoQ %

+ 1% ‐ 9% Cost Impact

QoQ YoY Rs per t cs 8 8 (1) (1) Total (Rs Cr) 0.53 0.53 (0.07) (0.07)

MT / t Kg / t

Q3 '08, 66 Q3 '09, 118 Q2 '09, 90 20 40 60 80 100 120 140

LD Gas Recovery

M3 / t

• f LS

YoY % QoQ %

+ 79% + 31%

QoQ YoY Rs per t cs 59 59 49 49 Total (Rs Cr) 3.94 3.94 3.27 3.27

Cost Impact

18

Standalone Financials – Q3 FY09

Q3 FY 09 Q3 FY 08

Turnover 3,055.34 3,108.43 EBITDA before exceptional items 433.48 817.43

EBITDA Margin 15.3 % 29.0 %

EBITDA 256.65 831.39 Cash Profit 200.18 700.94 Profit Before Tax (190.72) 510.82 Net Profit (127.50) 355.37 EPS : Diluted (8.93) 18.53

• Rs. Cr.

19

Subsidiary Subsidiary Performance Performance Subsidiary Subsidiary Performance Performance

20

Operational Performance - USA

PRODUCTION (NT) SALES (NT)

Q3 FY 09 YTD Dec’08 Q3 FY 09 YTD Dec’08

Plate Mill 47,487 299,630 27,660 172,875 Pipe Mill 27,198 128,560 28,550 133,566

21

Financial Performance - USA

Particulars

Q3 FY 09 YTD Dec’08

Turnover 87.93 470.61 EBITDA + Other Income 14.89 89.51

16.93 % 19.02 %

Cash Profit 3.13 56.48 Profit Before Tax (5.18) 31.94 Profit After Tax (2.78) 24.14 $ Mio

22

Financials Q3 FY 09

Particulars

JSW Steel Ltd (Standalone) JSW Steel Ltd (Consolidated)

Total Income 2,826.74 3,319.11 EBITDA before exceptional items 433.48 505.45 Cash Profit 200.18 175.26 Profit Before Tax (190.72) (265.30) Profit After Tax (127.50) (187.83)

• Rs. Cr.

23

Adj Long Term Debt Gearing - Standalone

Standalone Gearing of 1.20 Adj Long Term Debt & Networth

7,990 3,944 5,231 538 (1,000) 1,000 3,000 5,000 7,000 9,000 11,000 Adj LT Debt Networth FX Loss

9,713

FCL RTL

• Rs. Cr.

X

4,068 4,480 5,073 5,231 3,264 3,999 3,978 3,944 ‐83 118 538 426 ‐2000 2000 4000 6000 8000 10000 Q4 '08 Q1 '09 Q2 '09 Q3 '09

RTL FCL FX LOSS 0.93 1.02 1.15 1.2 2.04 2.15 2.37 2.73 ‐0.5 0.5 1 1.5 2 2.5 3

D:E Adj LT Debt/EBITDA

9,713 9,476 8,597 7,249 Q4 ’08 Q1 ’09 Q2 ’09 Q3 ’09 Wt Avg Cost of Debt (%) 7.59 7.63 8.35 8.29 FD & MF (Rs. Cr.) 106 635 206 90

• Rs. Cr.

24

Adj Long Term Debt Gearing ‐ Consolidated

8,049 7,563 5,301 1,289 (1,000) 1,000 3,000 5,000 7,000 9,000 11,000 13,000 15,000 Adj LT Debt Networth

Adj Long Term Debt & Networth Consolidated Gearing of 1.75

FX Loss FCL RTL 4,096 4,515 5,130 5,301 7,204 7,563 7,650 7,864 1,289 1,064 458 (29) ‐1000 1000 3000 5000 7000 9000 11000 13000 15000 Q4 '08 Q1 '09 Q2 '09 Q3 '09

RTL FCL FX LOSS 1.42 1.52 1.66 1.75 3.07 3.03 3.17 3.54 ‐0.5 0.5 1 1.5 2 2.5 3 3.5 4 4.5

D:E Adj LT Debt/EBITDA

• Rs. Cr.

X

Q4 ’08 Q1 ’09 Q2 ’09 Q3 ’09 Wt Avg Cost of Debt (%) 7.02 7.03 7.42 7.42 FD & MF (Rs. Cr.) 106 635 206 90 14,153 13,844 12,838 11,271

• Rs. Cr.

Project Commissioning Schedule

25

Major Projects Original Schedule Revised Schedule

Global-Integration ~ Exports

F O C U S

Strategic

Q-3

Green-Revolution ~ Rural prosperity

F O C U S

Rural-Marketing

26

39% 35% 34% 33% 34% 42%

Q-1 Q-2 Q-3

66% 67% 66% 58% 65% 61%

Q-1 Q-2 Q-3

Focus : Rural-Market … Coated Products

Q-1 Q-2

F.Y. 2008-09 F.Y. 2007-08

DOMESTIC EXPORTS

Q-3, 2008-09

Domestic Sales up

+ 14% Y-o-Y

• Ref. : JSW Steel Limited

27

JSW Steel - Marketing Strategy : Today

Import substitution

Maximising sales of Value-Added products Capitalising Rural demand Focus on bulk project orders Expanding exports across geographies

Automobile Automobile High Cost Housing High Cost Housing & Real Est. & Real Est. Capital Expenditure Capital Expenditure

• Pvt. Spending
• Pvt. Spending

Capital Expenditure

• Govt. / Public Spending

Capital Expenditure Capital Expenditure

• Govt. / Public Spending
• Govt. / Public Spending

Rural Demand Rural Demand Rural Demand Exports Currency Depreciation Exports Exports Currency Depreciation Currency Depreciation Low & Middle Income Housing Low & Middle Income Low & Middle Income Housing Housing

PROJECT UPDATES

28

BOF-CCP Integrated trials on the verge

• f completion.

Sinter Plant Commissioned in Aug. 08 Ready to feed Blast Furnace Coke Oven All 4 Batteries successfully commissioned Lime Calcinations Plant Unit already commissioned, ready to feed SMS. Blast Furnace Integrated trials going on and blowing by Feb’09 Wire Rod Mill: Commissioned in

• Nov. 08

Bar Rod Mill:

• Exp. Commissioning in

Mar 09

3 MTPA Expansion: Project Status

Expected commissioning in Feb/March 2009

29

Largest Furnace in India Volume = 4019 m3 Capacity of 2.8 MTPA. Technology supplier : Siemens

VAI,UK.

Furnace Proper completion has

taken 540 days to complete Refractory and other Testing jobs.

BLAST FURNACE

30

BLAST FURNACE : FURNACE TUYERE PLATFORM

3131

• The 2.8 MTPA furnace has 36 Tuyeres Blowing
• Staves are CI & Copper
• The SGP is RASA type

BLAST FURNACE: CONTROL ROOM

32

SMS : Converter 1

• Supplier :

SMS DEMAG / SMS MEVAC

• Capacity : 2.81 MTPA
• 2 * 175 Tons Converter

33

BILLET CASTER- RUNOUT

34

• Supplier : SMS Demag
• Capacity : 1.7 MTPA
• Type : 8 Strand
• Max Speed : 3.2 m/s

SLAB CASTER- RUNOUT

35

• Technology : SMS Demag / Concast AG
• Capacity : 1.6 MTPA
• Max Speed : 2.5 m/s
• Slab Size : 2200 mm Wide/ 300 mm Thick

36

LCP : KILN

• Supplier : Cimprogetti
• Capacity : 300 TPD

SINTER PLANT: SINTER MACHINE

37

• Supplier : Outokumpu, Germany
• Capacity : 2.3 MTPA
• Area : 204 m2

WIRE ROD MILL

38

• Supplier : MORGAN
• Capacity : 0.6 MTPA
• Product Mix : Plain Rod : 5.5 – 22 mm

Rebar : 6,8 & 10 mm

COKE OVEN : COKE PRODUCT

39

• Supplier : MECC ,China
• Capacity : 1.5 MTPA (Largest in its kind)
• Type : Recovery / Stamp Charged
• 4 Batteries (4 * 56 ovens)

HSM 3.5 MTPA: FINISHING MILL FOUNDATION

• Supplier : MHI, Japan
• Capacity (Phase 1) : 3.5 MTPA
• Size : L = 4.6 to 11 m

W= 900 to 2150 mm T = 220 to 260 mm Thick

• Slab Wt Max : 36 T

40

41

HSM 3.5 MTPA : FURNACE AREA

Pouring of hot metal

42

Hot Metal in Converter

43

Hot Metal in Converter

44

30 MW Power Project : Expected commissioning by March 2009 Railway Siding: Expected commissioning by FY 2011

Project Progress: Downstream

45

Consolidate position in domestic steel industry with focus on enhancing capacities at competitive cost Achieve significant position in domestic market. Raw material Integration to protect from cost fluctuations Strong financials to support Growth Enhance Value through Rich Product mix.

Sustainable GROWTH… ...Creating VALUE

Way Forward…

46

Q & A

47

Forward Looking and Cautionary Statement

Certain statements in this report concerning our future growth prospects are forward looking statements, which involve a number of risks, and uncertainties that could cause actual results to differ materially from those in such forward looking statements. The risk and uncertainties relating to these statements include, but are not limited to risks and uncertainties regarding fluctuations in earnings, our ability to manage growth, intense competition within Steel industry including those factors which may affect our cost advantage, wage increases in India, our ability to attract and retain highly skilled professionals, time and cost overruns on fixed-price, fixed-time frame contracts, our ability to commission mines within contemplated time and costs, our ability to raise the finance within time and cost client concentration, restrictions on immigration, our ability to manage our internal operations, reduced demand for steel, our ability to successfully complete and integrate potential acquisitions, liability for damages on our service contracts, the success of the companies in which the Company has made strategic investments, withdrawal of fiscal/governmental incentives, impact of regulatory measures, political instability, legal restrictions on raising capital or acquiring companies outside India, unauthorized use of our intellectual property and general economic conditions affecting our industry. The company does not undertake to update any forward looking statements that may be made from time to time by or on behalf of the company.

48