Release Date: July 31, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Jindal Stainless Ltd (BOM:532508, Financial) delivered the highest ever sales volume in Q1 FY25 with a 5% increase year-on-year.
- The company's co-branding scheme, Jindal Saathi 5.0, has been successful and plans are in place to roll out similar schemes in other customer-facing segments.
- The acquisition of Chromeni Steels Private Limited, which has a 0.6 million ton per annum cold-rolling mill, was completed.
- The company received several prestigious awards for its ESG efforts, including the International Safety Award from the British Safety Council for the fifth consecutive year.
- Jindal Stainless Ltd (BOM:532508) is confident about the domestic stainless steel demand continuing to rise, supported by robust economic activities and government infrastructure spending.
Negative Points
- Export sales remained flat quarter-on-quarter, affected by extended transit times and increased freight costs due to the ongoing Red Sea issue.
- The company faced challenges in executing the BIS certification norms, which impacted the effectiveness of import regulations.
- There were losses booked in Chromeni Steels Private Limited during the quarter, amounting to INR34 crore.
- The company has taken an enabling resolution to raise equity-like instruments up to INR5,000 crore, indicating potential future financial needs.
- Nickel price volatility remains a concern, as consistent sharp falls in nickel prices could impact the company's margins.
Q & A Highlights
Q: The first question is on the EBITDA per ton trajectory. We have seen some improvement after Q4. Can you confirm if the guidance for FY25 remains between 18,000 to 20,000 per ton? What were the key factors for this improvement?
A: Amit, we are sticking to our guidance of achieving between 18,000 to 20,000 per ton for the full year. The improvement in our margins was due to an uptick in nickel prices and our focus on high-margin sectors and grades. Additionally, we only exported grades with healthy margins.
Q: Can you provide an update on the ramp-up of Rathi and its EBITDA contribution this quarter?
A: Rathi has just started operations and is stabilizing. It's too early to share representative EBITDA figures, but we are targeting an EBITDA per ton of INR4,000 to INR7,000. We will have more concrete data in the next quarter.
Q: The overseas subsidiary in Spain has shown improved performance this quarter. Can you elaborate on this?
A: The improved performance is due to reduced inventory levels and price recovery in certain grades in European markets. This gives us confidence that the export market is showing an uptick, which should positively impact our volumes.
Q: What is the intent behind the enabling provision for raising INR5,000 crore through equity-like instruments?
A: This is an enabling resolution to prepare for organic and inorganic growth opportunities. We aim to meet expanding market demand and uphold our market position while maintaining a strong, prudent balance sheet.
Q: Can you provide more details on the co-branding scheme and its expansion into other consumer-facing segments?
A: We plan to extend the co-branding scheme, which has been successful in the ornamental pipe and tube segments, to other consumer-driven segments like utensils and stainless steel bottles. This initiative aims to support our customers and increase domestic downstream consumption.
Q: Are there any new segments facing competition from cheaper imports?
A: We have not exited any segments but have reduced quantities in some due to enough growth in higher-margin segments. The competition remains in similar segments as before.
Q: What is the status of the BIS certification norms and their impact on imports?
A: The BIS certification is a welcome step, but there are challenges in execution. We are in constant dialogue with the government to improve this. Effective implementation will significantly impact the industry.
Q: What was the volume throughput for JUSL this quarter, and what should we expect for the full year?
A: The volume throughput for JUSL this quarter was close to 500,000 tons. For the full year, we expect to maintain similar levels, focusing on internal tolling rather than external work.
Q: Can you provide an update on the Chromeni acquisition and its ramp-up?
A: Chromeni incurred around INR34 crore in losses this quarter due to interest and depreciation. We are hopeful that operations will start by Q3 this year.
Q: What is the status of the downstream assets like RVPL and Rathi? How are you managing the ramp-up and allocation of resources?
A: Chromeni is our main focus, followed by Rathi. The Jajpur team will handle Chromeni, and the Hisar team will manage Rathi. These assets are part of our manufacturing ecosystem and do not significantly strain management bandwidth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
