Results Presentation Quarter Ended Dec 31, 2012 1 Agenda Business - - PowerPoint PPT Presentation

1

Results Presentation

Quarter Ended Dec 31, 2012

2

Agenda

Business Environment Projects Update Operational Performance Financial Performance

3

Global economy is expected to grow by 3.5%* in 2013

Global economy

Source: Bloomberg, Industry data * World Economic Outlook update by IMF

• Global economic condition appears to have bottomed out, Nov 2012 IP data has turned positive
• US – Despite uncertainities on resolution of fiscal cliff and front-loaded tax increases, economy

continues to grow

• Europe – Economic weakness continues but risk associated to possibility of EU break-up has receded
• Japan – Outlook improves with recent fiscal and

monetary policy measures

• China – Economic stabilization is in progress, GDP grew

by 7.9% YoY in Oct-Dec 2012

• Policy actions and external trade rebalancing to drive

varied pace of growth across markets

• 25.00
• 15.00
• 5.00

5.00 15.00 25.00 Apr-07 Sep-07 Feb-08 Jul-08 Dec-08 May-09 Oct-09 Mar-10 Aug-10 Jan-11 Jun-11 Nov-11 Apr-12 Sep-12 Eurozone US Japan China India

Industrial Production (% YoY growth)

4

Indian economy

Source: Central Statistical Organisation, Bloomberg, Reuters, JSW Steel

GDP growth is expected to be ~6% in FY14

• Business sentiment has improved on the back of policy reforms/growth inducing measures by GOI
• However, measures to contain the twin deficits would be key in the forthcoming budget
• Overall WPI has fallen for third successive month; core inflation is below 4.5%
• Expectations are ripe for a possible rate cut by the RBI
• 3.0

0.0 3.0 6.0 9.0 12.0 Apr-07 Aug-07 Dec-07 Apr-08 Aug-08 Dec-08 Apr-09 Aug-09 Dec-09 Apr-10 Aug-10 Dec-10 Apr-11 Aug-11 Dec-11 Apr-12 Aug-12 Dec-12 Change - % YoY Overall WPI Core Inflation

• 15.0
• 7.5

0.0 7.5 15.0 22.5 40 45 50 55 60 65 Jan-07 Jun-07 Nov-07 Apr-08 Sep-08 Feb-09 Jul-09 Dec-09 May-10 Oct-10 Mar-11 Aug-11 Jan-12 Jun-12 Nov-12 PMI IIP (% YoY, 3 mma, RHS)

5

Source: World Steel Association, Steel Business Briefing * Demand growth outlook by World Steel Association

• World crude steel production grew by just ~1.2% in 2012 vs. demand growth estimate of 2.1%*
• Capacity utilization has dropped below 75%
• Finished steel inventories are low in most of the key markets
• During Oct–Dec 2012, average HRC prices fell up to 5% QoQ across key markets (except China)

Global steel demand is expected to improve in 2013

Global steel scenario

60% 70% 80% 90% 85 95 105 115 125 135 Apr-10 Jun-10 Aug-10 Oct-10 Dec-10 Feb-11 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12

World crude steel production (mmt) Capacity Utilisation (%) -RHS

500 560 620 680 740 800 860

Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 HRC prices ($/tonne)

North America Domestic ExW Europe import CIF Black Sea export FOB China export FOB

6

8 16 24 32 40 10 12 14 16 18 20 Apr-11 Jun-11 Aug-11 Oct-11 Dec-11 Feb-12 Apr-12 Jun-12 Aug-12 Oct-12 Dec-12 Retail Sales of consumer goods (% YoY)

• Invt. in real estate development (YTD, % YoY) - RHS

China

Source: World Steel Association, MySteel, National Bureau of Statistics of China

• GDP grew by 7.9% YoY during Oct-Dec 2012 vs. 7.4% YoY during Jul-Sep 2012
• Both sentiment and economic data have started to improve in China
• Retail sales, Industrial production continues to uptrend
• PMI, Urban FAI and real estate investment remains steady
• Crude Steel production is up 3.1% in 2012, warehouse inventories to finished steel consumption

ratio is low

Economic stabilization is in progress

350 410 470 530 590 650 710

• 12%
• 5%

2% 9% 16% 23% 30% Jan-10 Jun-10 Nov-10 Apr-11 Sep-11 Feb-12 Jul-12 Dec-12

Annualized Crude Steel Production (mmt) -RHS Crude Steel Production (% YoY) Apparent Steel Consumption (% YoY)

7

221 330 310 280 230 205 221 170 165

100 140 180 220 260 300 340 380 Jan-11 Apr-11 Jul-11 Oct-11 Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Australian HCC Quaterly Contract FOB Australian Spot HCC FOB

Source: Steel Business Briefing, Platt‘s, Industry data, Macquarie Research, JSW Steel (All figures are in USD/tonne)

Raw material prices to be less volatile in 2013

• Iron ore prices surged to ~$159/t with restocking demand in China before holidays; however it has

started falling and expected to be in $120-130/t range in 2013

• HCC spot prices have improved to ~$165/t and is expected be in $160-170/t range in 2013
• HCC quarterly contract prices are settled at ~$160-165/t for Jan-Mar 2013

Raw material prices

80 100 120 140 160 180 200 10 15 20 25 30 35 40 Sep-10 Nov-10 Jan-11 Mar-11 May-11 Jul-11 Sep-11 Nov-11 Jan-12 Mar-12 May-12 Jul-12 Sep-12 Nov-12 Jan-13 Iron ore inventory at 50 smaller mills in China (mmt) IODEX 62% Fe $/dmt / North China import CFR - RHS

8

India steel scenario

Source: Joint Plant Committee (All figures are in million tonnes) *Gross of double counting

FY14 – demand to improve on the back of reforms, imports are a concern

• Apparent finished steel consumption grew by 4.4% in 9MFY13
• Finished steel production increased by 3.6% in 9MFY13
• 9MFY13 finished steel imports increased by 16.2% to 5.79 million tonnes whereas steel exports

grew by 24% to 3.78 million tonnes

• Imports from countries under FTA (South Korea and Japan) continues to be higher

54.74 56.83 56.72 59.34 Finished Steel Production* Apparent Finished Steel Consumption* 9MFY12 9MFY13 3.6% 4.4% 4.98

0.66

0.94 3.05 5.79 0.98 1.16 3.78 Overall Finsished Steel Import Imports from Japan Imports from South Korea Overall Finsished Steel Exports 9MFY12 9MFY13 16.2% 48.6% 23.0% 24.0%

9

Karnataka Iron ore update

• R&R plans are approved for 20 mines and are under preparation for rest of

the mines

• 12 mines have accepted all the conditions stipulated by the Hon’ble

Supreme Court to consider re-commencement of mining

Category ‘B’

• On approval of Reclamation & Rehabilitation (R&R) plans by CEC, 6 mines

(capacity of ~3.3 MTPA) have resumed operations

• These mines have produced ~0.71 million tonnes till Dec 31, 2012 (yet to

be put for auction)

• Another 4 mines (capacity of ~1.8 MTPA) are in various stages of approvals

and expected to commence production by Mar 2013

Category ‘A’

10

Agenda

Business Environment Projects Update Operational Performance Financial Performance

11

Projects' update

• Corex-II: was shut down for capital repairs and capacity enhancement, has

resumed production on Jan 15, 2013

• CGL-1 at Vasind: was shut down for adding online skin pass facility to cater

appliance grade products, has recommenced operations on Jan 1, 2013

• Value added flat steel projects:
• Coated product capacity ehancement at downstream facilties (Vasind and

Tarapur) from 0.925 MTPA to 1.2 MTPA

• New Cold Roll Mill of 2.3 MTPA at Vijayanagar
• Non-Grain Oriented Electrical Steel facility of 0.2 MTPA at Vijayanagar
• Above projects to take share of value added products portfolio to 40-50% of
• verall capaciites over next two years

12

Projects' update contd..

Corex–II: Resumed operations on Jan 15, 2013 post capital repairs and capacity enhancement

13

Projects' progress

Cold Rolling Mill -2: Phase I will be commissioned by FY14 and Phase II by FY15

14

Projects' progress contd..

New Galvanizing line at Tarapur

Up-gradation of Colour coating line at Tarapur

Colour coating line at Vasind Railway Siding Project at Vasind

New line

15 4 MTPA Pellet plant (at Dolvi for JSW Ispat): will be commissioned in FY14

Projects' progress contd..

1 MTPA Coke Oven (at Dolvi for JSW Ispat): will be commissioned in FY14

16

Agenda

Business Environment Projects Update Operational Performance Financial Performance

17

Key highlights

• The scheme of merger has been approved by:
• the Competition Commission of India,
• NSE and BSE
• Court convened meetings of equity and preference shareholders of both

the companies to be held on January 30, 2013

JSW Steel – JSW Ispat merger update

• Crude steel production: 2.09 million tonnes (8% YoY)
• Saleable steel sales: 2.17 million tonnes (14% YoY)
• Net Sales: ` 8,275 crores (5% YoY)
• Operating EBIDTA: ` 1,314 crores (5% YoY)
• PAT: ` 137 crores
• Inferior quality of iron ore with low Fe, high alumina and manganese

impacting productivity by 20 percent

Operational / financial

• Steel for Steering Knuckle, Front Axle Beam and Axle Hub
• Steel for High Pressure Boiler Application
• Cold Rolled Low Carbon EDD steel for PV exposed panel
• Cold rolled High Strength steel for PV structural and safety applications
• Cold Rolled Low carbon Bake Hardened Steel for 3 wheelers

New product approvals

18

0.37 0.48 0.45 3QFY12 3QFY13 2QFY13

Rolled : Long

1.39 1.57 1.45 3QFY12 3QFY13 2QFY13

Rolled : Flat

1.94 2.09 2.17 3QFY12 3QFY13 2QFY13

Crude Steel

YoY QoQ 13% 8%

Production – 3QFY13

All figures are in million tonnes

YoY QoQ 31% 8% YoY QoQ 8%

• 4%

19

1.06 1.36 9MFY12 9MFY13 Rolled : Long 5.36 6.41 9MFY12 9MFY13

Crude Steel

Production – 9MFY13

All figures are in million tonnes

3.87 4.63 9MFY12 9MFY13 Rolled : Flat YoY % 20% YoY % 20% YoY % 29%

20 0.41 0.37 0.42 3QFY12 3QFY13 2QFY13

Value Added 1.91 2.17 2.17 3QFY12 3QFY13 2QFY13 Total Sales

Saleable steel sales – 3QFY13

All figures are in million tonnes

1.44 1.66 1.66 3QFY12 3QFY13 2QFY13

Rolled : Flat YoY QoQ 14%

• %

YoY QoQ 15%

• %

YoY

• 11%

QoQ

• 13%

0.10 0.08 0.11 3QFY12 3QFY13 2QFY13

Semis YoY QoQ

• 25%
• 27%

0.36 0.43 0.40 3QFY12 3QFY13 2QFY13

Rolled : Long YoY QoQ 18% 6%

21 4.19 4.99 9MFY12 9MFY13

Rolled : Flat

1.23 1.20 9MFY12 9MFY13

Value Added

5.50 6.45 9MFY12 9MFY13

Total Sales

Saleable Steel Sales – 9MFY13

All figures are in million tonnes

0.32 0.24 9MFY12 9MFY13

Semis

0.99 1.21 9MFY12 9MFY13

Rolled : Long YoY % 17% YoY % 19% YoY %

• 3%

YoY % 22% YoY %

• 25%

22 330 380 31 Dec 2011 31 Dec 2012 1.26 0.45 Others JSW Shoppe

JSW Shoppe

*It is a subject of case study at various global B- Schools

Rolled: Long Rolled: HR Products 43%

Domestic sales excluding semis (million tonnes, % Share)

Value Added: Flat 74% 26% 28% 46% 26%

% Share through JSW Shoppe – 3QFY13

15%

JSW Shoppe: A unique retail marketing model for steel*

• No. of JSW Shoppe

23

Agenda

Business Environment Projects Update Operational Performance Financial Performance

24

Financials – standalone

* Not Annualized

Particulars 3QFY13 3QFY12 Growth 9MFY13 9MFY12 Growth

Gross Turnover 9,121 8,498 7% 28,688 24,367 18% Net Sales 8,275 7,860 5% 26,139 22,549 16% Operating EBITDA 1,314 1,253 5% 4,612 3,979 16% Other Income 57 46 24% 207 131 58% Finance Cost 455 327 39% 1,282 819 57% Depreciation 498 444 12% 1,446 1,236 17% Exceptional Items (327) (500) (497) (1,020) Profit Before Tax 91 27 236% 1,593 1,035 54% Tax (46) (141) 365 161 Profit after Tax 137 168

• 19%

1,228 874 41% Diluted EPS (`)* 5.76 7.18 53.95 38.07

` Crores

25

Operating EBITDA movement – standalone

` Crores

1,253 1,314 172 (394) 180 34 69 EBITDA 3QFY12 Volume NSR Cost Mix Others EBITDA 3QFY13

26

Net debt movement – standalone

* Net Debt excludes Acceptances

` Crores

Particulars 31.12.2012 30.09.2012

Cash & cash equivalent (` Crores) 1,774 2,338 Net Debt/Equity (x) 0.86 0.75 Net Debt/EBITDA (x) 2.68 2.35

14,586 16,810 2,328 (847) 179 564 Net Debt* as on Sep'12 New Loan Taken Repayments Forex Gain Movement in FD / MF Net Debt* as on Dec'12

27

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

• f 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.

28

Thank you