Jindal Steel & Power Ltd (JSPL) is expected to reduce debt by Rs 4,000-5,000 crore in FY19, said Naushad Akhter Ansari, CEO of the company.
“We target total steel sales volume of 9 million tonne in FY19 for both India and Oman,” Ansari told CNBC-TV 18.
JSPL posted a consolidated net profit of Rs 5.5 crore in Q4FY18 against net loss of Rs 351 crore in Q4FY17.
Watch: Expect to reduce debt by Rs 4,000-5,000 crore in FY19, says JSPL Edited Excerpts: On an adjusted basis your results look good, but just give us some more clarity on the exceptional items this quarter?
There was some royalty payment for the early iron ore which government wanted and for which the provisioning has been done primarily because earlier it was not provided for. So, it is primarily related to that.
So, with this have you fully provided for the royalty or should we expect more of the same in the coming quarters?
A: No, this is fully provided.
What are the sales volumes, can you give us some details on the revenues? The sales volumes targets that you have for FY19 both for India and Oman?
A: Yes, so the total sales volume which should also be something similar to the production volume, which is somewhere close to about 9 million tonne both in India and Oman. Out of that a little over 2 million tonne will come from Oman and roughly about 7 million tonne will come from India.
The domestic steel business was quite strong, what was the EBITDA per tonne and can you hold on to this performance?
In Q3 it was close to about 9,800 and this quarter it had been more than 12,000 in fact close to about 12,800 and so. So, it is a substantial increase. Primarily, this has happened because we have been able to reduce our cost substantially and also the production volumes have gone up. So, therefore all the fixed costs, the manpower costs etc... getting diluted to that extent. That is how you find that these EBITDA numbers look much better than what they had looked in the Q3.
Going forward, the market still looks good, obviously there would be challenges, we have no doubt about it. But, we would imagine that with the kind of demand pull which is still there, the kind of cost reduction programme which we continue to have, we should be able to operate in that region where we left it in the last quarter so to speak.
Oman delivered its best performance ever, can we expect a better performance from the Oman business over the next few quarters? Is an EBITDA of $300 million on the cards perhaps in FY19?
Yes, so that is the kind of number we are looking at something close to about $300, maybe somewhere between $280 to 300 million is what we are expecting from Oman. All that will be possible because of a number of factors. Number one is that we have got some additional gas in Oman. Earlier we used to buy a much more metallics, now from August - September our requirement of purchase metallic will come down and there is a substantial difference in the cost that should add to the EBITDA number.
Then we are also putting a second billet caster, that should be up and running sometime around September and that should be able to give us additional production because caster is a limitation out there. We are also producing more value-added rates now much less of square billet, we are actually making value-added rounds.
The rebar production has also gone more than 100,000 tonnes per month so all these factors and plus very stringent cost control, these are all factors which have resulted into this high level of EBITDA. Going forward, we are also hoping that the market remains at that level and that we are able to get the kind of numbers which we have mentioned.
What about steel prices, how do current prices compare with the fourth quarter of FY18, and are you planning any increase?
By and large the prices are at the same level. It has not gone up very substantially, it is in the same region. In fact in some product you will find some pressure for example in rebar there may be some pressure, whereas in plates maybe there is a marginal increase. But overall I would say that the prices in this quarter are almost similar to the Q4 prices.
What about the power business? What is the outlook there?
I wish that we would had the similar kind of success in power as we had in steel. But the fact is that in power the coal shortage really continues to be a major problem. The availability of coal at the right kind of price is simply not there and that is really most of the power plants including us are suffering because of that. In addition to that the power purchase agreement (PPA), are also a major issue, so yes, we only wish that the power situation also improves, power business improves.
But as of now there are major challenges out there, We still don't have the answers which I can tell you. We don't know that. It is something that we are hoping that the commercial mining of coal will help, then it can perhaps lead to more availability of coal. If that happens that will certainly be a welcomed scenario. But, I really don't have an answer that by what time this problem can be solved.
We will await more clarity on that, but can you tell us a little bit about the balance sheet. What was the debt at the end of FY18 and where is it headed now?
So you know at the end of FY18 our debt level was close to about Rs 42,000 crore. Our peak level debt was Rs 46,500 crore. So, compared to our peak we have brought it down by about Rs 4,500 crore. Going forward, in the FY19 based on our preliminary estimates of a likely EBITDA and the amount of money which we need to pay for interest etc... we expect that we will be able to reduce our debt by about Rs 4,000 to 5,000 crores. That is the kind of number we expect that we should be able to achieve, so from Rs 42,000 we should be able to bring it down to Rs 37,000- 38,000 kind of a number.
Is listing your Oman subsidiary likely in FY19?
Yes, certainly it is a possibility. I mean there is a work which is going on. But still a lot of ground is required to be covered. So, by what time it is going to happen is a question. But the work is already ongoing it is something which is on the top of our mind.
No, we are not calling it out. The long stop date remains June and the two companies are talking to each other. Most likely they will extend this date by several months or so, maybe a year. So, that is a discussion which is going on. So, as of now it is not called off.
Final question then is the deal with JSW Energy still on as the deadline is June 2018.