Jindal Steel and Power's (JSPL) Q1 earnings came in better than estimates with the consolidated net loss narrowing while the power business outperformed.
In an interview to CNBC-TV18, Ravi Uppal, MD & CEO of JSPL spoke about the results and his outlook for the company.
Looking to reclaim Rs 10,000/tonne in terms of EBITDA, he said.
The newly commissioned plant at Angul is producing 5,000 tonne per day. “We will try to increase its volume. In the next two-three months we will take it to the level of about 8,000 tonne a day and by early Q4 we should try to touch its full capacity of about 10,000 tonnes,” he added.
All the plants are ready to deliver to its capacity, we are just waiting for demand to come about. Once it comes, we are ready to deliver, said Uppal.
Speaking on Supreme Court (SC) verdict on Odisha mining case, he said JSPL has mined strictly according to permissions granted by the government. There is absolutely no penalty payable in Odisha mining case for JSPL.
Sarda Mines (P) Ltd (SMPL) is our supplier. For the last three years, since they have suspended their supplies to us, we have been buying iron ore from the local market and we have been able to manage. Currently we are not dependent on SMPL anymore, he further mentioned.
Total iron ore fully-paid inventory is around 12 million tonne (mt) and iron ore inventory at Sarda is fully paid for including all duties, he said.
Technically, iron ore inventory at Sarda mines belongs to JSPL and we are waiting for SC to reconfirm the decision which has been taken by the Odisha High Court and we are given to understand that this will be done in next 10 weeks, Uppal added.
JSPL has a plan in place to pare debt and is also in the process of restructuring domestic and foreign debt.
Current focus is on increasing operational profit, said Uppal.
Below is the verbatim transcript of the interview.
Anuj: Can you tell us if the domestic EBITDA per tonne can improve from hereon as well?
A: The EBITDA per tonne in the first quarter of 2017 was about Rs 8,200 which increased to about Rs 10,000 in Q4. In the last quarter, Q1 FY18, EBITDA was Rs 9,400. Q4 was a big quarter, volumes were very large, therefore it went to a level of Rs 10,000, but I am pretty confident that JSPL is all set to reach that number once again once the volumes are ramped up.
Latha: How is the newly commissioned plant coming along, current capacity utilisation levels, where are they and where are they headed say in the coming quarter and the second half?
A: The blast furnace was commissioned into service yesterday. Until then we were basically doing a lot of trials. As you know that this is a huge system, it takes a couple of months for the production to stabilise, but the good news is that after commissioning yesterday, we are gunning about 5,000 tonne of hot metal from the furnace in the days and weeks to follow. We will try to sort of increase its volume. I guess that in the next two to three months, we will take it to a level of about 8,000 tonne a day and by early fourth quarter, we should try to touch its full capacity of about 10,000 tonne.
Anuj: Your combined plant load factor (PLF) was 43 percent versus 27 percent. Some part of the street believes that Tamnar I was at 80 percent, can you explain?
A: The last quarter the capacity utilisation has been about 43 percent and you can see that that has led to revenue increasing by nearly 68 percent because the same quarter last year the capacity utilisation was just about 34 percent. All the plants are absolutely ready to deliver to its full capacity, we are just waiting for demand to come about. Once the demand comes, we are ready to deliver. This plant can go up to level of nearly 95-96 percent of PLF as we have demonstrated in the past when we were running the 1,000 megawatt plant. So, plant is very stable, and delivering power on a very reliable basis and I do hope that more power purchase agreement (PPAs) will come in the market. However, until the PPAs come, we will try to supply power through the power exchange.
Latha: Could you clarify the impact of the Supreme Court verdict in the Odisha mining case, the impact on Jindal Steel and Power (JSPL) I mean? What was the fine levied on Sarda Mines (SMPL), is JSPL liable to pay this fine?
A: The Supreme Court judgment basically said all the producers who have admitted to having done excess production, they should pay penalty, and thereafter they can resume the mining and the penalty has to be paid before the year end. We do not fall into that category because we have done the production strictly according to the contract that we have and the permissions given by the government and we remain firm on our view and we have documentary evidence to show to anyone. So we feel that there is absolutely no penalty which is applicable in case of JSPL.
Anuj: If Sarda Mines is in the dock then won’t it impact your iron ore supply?
A: Sarda Mines is basically our supplier. So, we for the last three year since they suspended their supplies to us, we have been buying the iron ore from the local market. Plus, we have our own mine in Tensa from where we get about 3 million tonne and we have been able to manage. Our current level of profitability margins is based on getting the iron ore from the neighbouring markets. We are not dependent on SMPL anymore. We are very much on our own. So, SMPL is just one of the many suppliers that we have.
Latha: When is the next hearing with respect to Sarda iron ore case, and what is the quantum of the paid iron ore inventory?
A: Let me take the second question first. The total inventory which is lying there is about 12 million tonne. This is the one which we have already bought from our supplier, SMPL. The royalty has been paid, we have paid the money for this iron ore, therefore it legally and technically belongs to us. We are just waiting for Supreme Court to reconfirm the decision which has been taken by the Odisha High Court. We are given to understand that this will be done in the space of next 10 weeks.
Anuj: What is the deleveraging plan because we have not seen any sign of that so far?
A: Deleveraging is a progressive effort. Our debt is made of three component, domestic debt which is for JSPL, we got the debt which is on the books of Jindal Power (JPL), and plus the overseas debt. For each one of them, we have a separate plan. You are aware last year we have done the restructuring through the 5/25 and we are right now in the process of restructuring our overseas debt and also discussing with our bankers our restructuring of the local debt.
While we do this, at the same time we have deep focus on how we ramp up our EBITDA earnings because EBITDA is the main instrument through which we are going to pay back our interest and the debt re-servicing. So, therefore there is singular focus on that. Plus from time-to- time we have done the divestments, you have seen we had done in the past, we don’t make much noise, but it is something that we have done quietly and very progressively. So, I think everything will be added.
We are in constant discussion with our bankers. It is a very open dialogue, they would like to see us healthy, they have seen that our earnings, EBITDA earnings are improving quarter after quarter and we are becoming more and more self-sufficient to service all our applications. So, I think that as time goes by, we should be in the front position to service the debt as well as the repayment of the debt.