JSW Steel Ltd

NSE:JSWSTEEL

Earnings Call Analysis

JSW Steel forecasts growth with improved margins and production targets

In Q2 FY ’25, JSW Steel navigated a challenging environment with a consolidated revenue decline of 8% to INR 39,684 crores. Despite this, EBITDA margin improved to 13.7%, bolstered by lower coking coal costs, which fell by $27 per tonne. For FY ’25, the company maintains guidance of 28.4 million tonnes in production and 27 million tonnes in sales. Looking ahead, domestic demand is anticipated to strengthen in H2, driven by government and private capital expenditures, while the impact of China’s stimulus is expected to stabilize global steel prices.

Strong Q2 Performance Amidst Challenges

JSW Steel reported a resilient performance in its Q2 FY '25 earnings, navigating a challenging global steel environment. Despite a drop in consolidated revenues to INR 39,684 crores (down 8% QoQ), EBITDA remained stable at INR 5,437 crores, translating to an EBITDA margin of 13.7%. Notably, the Indian operations achieved an impressive EBITDA per tonne of INR 9,266, slightly higher quarter-on-quarter. The company witnessed strong domestic sales, particularly in the institutional segment, indicating a solid demand foundation.

Guidance and Production Strategy

Looking forward, JSW Steel retained its production guidance at 28.4 million tonnes and sales at 27 million tonnes for FY '25. The management is optimistic about increased output with new capacities coming online. Enhanced production from facilities at BPSL and Vijayanagar is anticipated in the second half of the fiscal year, contributing to meeting the full-year targets.

Impact of Commodity Prices on Margins

Coking coal prices have provided relief, dropping by about $27 per tonne, which is expected to be further reduced to a range of $20 to $25 for Q3 FY '25. This decline, coupled with lower iron ore costs, will likely facilitate margin expansion as operational efficiencies are enhanced to counter recent price pressures.

Domestic Market Strength and Future Outlook

India's steel demand is on the rise, showing a Y-o-Y growth of 11.6% in consumption, prompting a positive outlook for JSW Steel. The company's leadership noted that domestic demand for the steel sector would benefit from increased government capex and recovery in private sector investments. The management is hopeful that pricing power will improve, with strategic price hikes already implemented by the industry in October.

Debt Levels and Future Capital Expenditure

JSW's net debt increased by approximately INR 4,900 crores, totaling around INR 85,000 crores. This rise is attributed to capital expenditures and certain one-off cash outflows. The company has revised its annual capex forecast down from INR 20,000 crores to a range of INR 16,000 to 17,000 crores, signaling a focus on optimizing investments while ensuring critical projects remain on track. The management emphasized their commitment to maintaining a favorable net debt-to-EBITDA ratio, targeting a reduction below 3% in the medium term.

Global Economic Influences and Competitive Landscape

JSW Steel's performance is contextually linked to broader global economic conditions. Factors such as China's stimulus measures and ongoing geopolitical risks cannot be overlooked. The management remains vigilant regarding potential impacts from increased steel exports from China, which could hinder domestic pricing dynamics. Thus, monitoring international market movements will be crucial for future profitability.

Earnings Call Transcript 2025-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to JSW Steel Q2 FY '25 Results Conference Call. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Ashwin Bajaj, Group Head of Investor Relations. Thank you, and over to you, sir.

[Ashwin Bajaj, executive]

Thank you, [ Rutuja ]. Good evening, ladies and gentlemen. This is Ashwin Bajaj, and it's a pleasure to welcome you to JSW Steel's earnings call for Q2 for the financial year 2025.

We have with us today the management team represented by Mr. Jayant Acharya, joint MD and CEO; Mr. G. S. Rathore, Chief Operating Officer; and Mr. Swayam Saurabh, the Chief Financial Officer. We will start with opening remarks by Mr. Acharya, and then open the floor to questions. So with that, over to you, Mr. Acharya.

[Jayant Acharya, executive]

So good evening, everyone. Thank you for being here. The global economy continues to perform well. The IMF has maintained its forecast of a stable growth in the year 2024 and '25, both. Inflation is cooling off. IMF has also upgraded the U.S. growth forecast.

However, Europe, China, Japan continue to be a bit weaker. The interest rate cutting cycle has begun and that is likely to be a positive for the economy at large. China's announcement of stimulus has been a positive development. And we see that reflecting in commodities and metals. Geopolitical risks, especially from the potential escalations, which we have seen in the recent past, remain a key concern.

In India, a good monsoon is expected to benefit the rural economy. As we go into H2, we see the government CapEx, which was low in the first half due to the elections and weather disruptions will improve. A healthy fiscal balance, stronger tax collection should be supportive of continued CapEx spending. The RBI has maintained its GDP growth projection of 7.2% and has shifted its stance to neutral, which opens up space for policy easing going forward once the inflation expectations are under control.

Global steel production declined by 1.9% year-on-year to 1,394 million tonnes. During January to September, this includes about 3.6% drop in China, while the rest of the world saw a modest growth of 0.3%. In quarter 2 FY '25, India's crude steel production grew by 2.7%, and Y-o-Y to 36.23 million tonnes with a consumption growth of 11.6% Y-o-Y to 37.09 million tonnes. We expect this strong demand momentum to persist with steel demand likely growing by around 10% to 11% in FY '25.

India steel imports in quarter 2 jumped by about 43% Y-o-Y to 3.18 million tonnes, while exports fell by close to 30% to 1.27 million tonnes, making India a net importer of about 1.9 million tonnes for the quarter. Meanwhile, China's aggressive steel exports growth resulted into 84 million tonnes getting exported in Jan to September, which was a growth of 21%, has put pressure on the global steel prices at large.

In response, several countries have imposed restrictions on Chinese imports. The Indian Steel Association is actively engaging with the government to ensure a level playing field for the domestic industry. Notably, the DGTR has initiated antidumping investigations against Vietnam and China for certain products during the quarter.

At JSW Steel, mainstreaming sustainability across our business and generating sustainable value has been a priority. Energy transition is one of the focus areas for us to achieve carbon neutrality by 2050. So far, the Board had approved procurement of renewable power, totaling 1,637 megawatts across our locations. Of this, 375 megawatts has been commissioned and balance are in various stages of being commissioned.

The Board has approved further renewable capacity of 870 megawatts taking our total renewable capacity under procurement to 2,507 megawatts. With this, we will be able to achieve close to 25% of our power requirement, including JVML through renewables. JSW Steel has consistently delivered industry-leading value accretive growth over the past 2 decades.

We have already outlined our road map to reach 50 million tonne in India through brownfield expansions by FY '31. Expansions are underway to achieve 42 million tonne capacity in India by September '27. The 1 million tonne expansion in BPSL has been commissioned, taking the capacity to 4.5 million tonnes, incremental volumes are expected to flow in from quarter 3 '25. At JVML Vijayanagar, we have commissioned the HSM in March '24 and followed it up with the blast furnace and some associated facilities in end September.

The steel melting shop is under commissioning and ramp-up is expected by quarter 4 '25. Alongside expanding our steelmaking capacity, we are also strengthening our downstream capabilities with a strategic goal of driving over 50% of our sales from value-added and special products. As a part of this vision, we recently acquired 100% equity in thyssenkrupp Group Electrical Steel India Limited through a joint venture with our partner, JFE Steel. This acquisition grants the joint venture immediate access to the market as the production at our joint venture CRGO facility in Vijayanagar, is expected to begin in 2027.

Additionally, JSW Steel will also get access to technology for electrical steel making from thyssenkrupp Group Steel further strengthening our technical edge and market position. Coming to our strategy of enhancing our raw material security, in Karnataka, we have increased our iron ore mining from 7 million to 11 million tonnes capacity for our existing captive mines, and we expect to mine about 10 million tonnes from these in FY '25. Of the 3 new mines in Karnataka, 2 are likely to be commissioned in quarter 4 of FY '25. The third mine is expected to be commissioned latest by first quarter of FY '26.

These announcements will take our Karnataka captive mining capacity to 15.5 million tonnes. In Goa, the public hearing for one of our mines has been completed and we are working towards commencing mining operations in the next 3 to 6 months, which has a capacity of 0.5 million tonnes. Meanwhile, BPSL's Netrabandha mine in Odisha is also expected to begin production in the next 3 to 6 months with an estimated capacity of 2 million tonnes per annum.

On the coking coal front, we have completed the acquisition of 20% effective interest in Illawara coking coal mines in Australia with offtake to start early FY '26. Additionally, we secured long-term coking coal linkages from Coal India during the recent auctions. These linkages available for 15 years will provide around 2 million tonnes of raw coking coal further strengthening our overall raw material base on this critical resource.

During quarter 2 of FY '25, we reported consolidated crude steel production of 6.77 million tonnes which was up by 7% Y-o-Y as well as quarter-on-quarter. Steel sales at 6.13 million tonnes, which was down 3% and flat Q-o-Q. Our capacity utilization was higher at 91% versus 87% in quarter 1 of FY '25, while a sharp decline in exports due to weak global markets impacted sales volume.

Crude steel production at our Indian operations for the quarter at 6.63 million was the ever highest growing by 7% Y-o-Y and 8% Q-o-Q. Steel sales for the quarter at 5.96 million tonnes were lower by 4% Y-o-Y and higher 1% quarter-on-quarter, while exports were significantly lower, and that was the main reason for a lower sales volume, the domestic sales were the highest ever growing 5% quarter-on-quarter and 1% Y-o-Y on a good domestic steel growth in the first half of this year.

We had the highest ever quarterly sales to the institutional segment, up by 12% Y-o-Y. Our sales to the solar segment grew by 54%. We reported highest ever sales in LRPC and Wire Rod. Our sales to the appliance segment grew 43%, while our Tinplate sales to the packaging sectors were also up by 38% Y-o-Y. Our VASP sales volumes was at 60% during the quarter which was primarily lower due to lower exports. On a half yearly basis, while exports fell 35% Y-o-Y, our domestic sales grew 7% Y-o-Y to 10.88 million tonnes which was our highest ever half yearly domestic sales.

Quarter 2 FY '25 financial performance has been in a challenging external environment. Our consolidated revenues from operations were at INR 39,684 crores, down 8% quarter-on-quarter, while EBITDA stood at INR 5,437 crores lower marginally by 1% quarter-on-quarter. With an EBITDA margin of 13.7%, which is an improvement over the last quarter.

Our EBITDA on per tonne basis was at INR 8,916 per tonne and the profit after tax was INR 404 crores. At our India operations, EBITDA per tonne at INR 9,266 was marginally higher quarter-on-quarter, and our investor presentation has a slide giving metrics on the India operations. During the quarter, we have seen strong price headwinds, especially in September, largely driven by elevated imports into India.

Our export sales and realizations were also impacted due to weaker global sentiments and elevated steel exports from China. Our India NSR fell by a little over 3,000 on a quarter-on-quarter basis during quarter 2 FY '25. While the international prices fell by about $50, if I were to take China reference prices. But in spite of these headwinds, we were able to deliver a resilient performance during the quarter aided by a sharp reduction in costs.

Our coking coal costs, as we had guided was lower by $27 per tonne. We also benefited from lower iron ore costs and lower inventory losses versus the last quarter. The U.S. operations Ohio and Texas combined had an EBITDA loss of about $11 million, primarily because of drop in prices, both in hot-rolled, cold and plates and a maintenance shutdown at Ohio. The Italy operations generated an EBITDA of [ $6.2 ] million, volumes improved, but the pricing environment remained weak.

As you are aware, we have applied for the surrender of the Jajang mine in Odisha in August '24. IBM has approved the mine closure plan, and we have then submitted a further application for surrender of the mine to the state government. Pursuant to the closure plan approval, we have recognized a provision of INR 342 crores which is an exceptional item during the quarter. Our net debt increased by approximately INR 4,900 crores to about INR 85,000 crores, mainly due to CapEx the acquisition of our Illawara coking coal asset and some increase in working capital, including the recently commissioned capacities of JVML and BPSL.

We expect working capital release during H2, driven by inventory liquidation during peak consumption season. We spent about INR 3,384 crores of CapEx during the quarter, INR 7,850 during H1. We are revising our annual CapEx down from INR 20,000 crores to INR 16,000 crores to INR 17,000 crores, primarily on account of transfer of slurry pipeline to JSW Infrastructure and the BF-3 shutdown at Vijayanagar being shifted to H1 post stabilization of the BF-5 furnace at JVML.

Our revenue acceptances as on 30th September were $1.81 billion, while capital acceptances were at $71 million. JSW One platform, our one-stop digital marketplace for Indian MSMEs in the manufacturing and construction ecosystem continues to scale up and has more than 67,500 registered MSME customers. The GMV during quarter 2 scaled to almost 2.4x Y-o-Y to INR 2,755 crores and continues to grow rapidly. JSW Steel holds 62% in JSW One platform on a fully diluted basis.

On the outlook side, I think as we highlighted earlier, we will get enhanced production from the new capacities at BPSL and Vijayanagar from H2 onwards. We are retaining our volume guidance of 28.4 million tonnes for production and 27 million tonnes of sales for FY '25. We will take the 5-month shutdown of BF-3 Vijayanagar for capacity enhancement post the stabilization of the new blast furnace at JVML.

We expect that to happen in FY '26 the shutdown of BF-3. For quarter 3 FY '25, we are seeing improved sentiments in domestic and global markets following the China stimulus announcement, leading to an uptick in global steel prices Similarly, the domestic steel prices after bottoming out in September have increased in October, both in longs and flats. We expect costs to go down, driven primarily by coking coal in the range of $20 to $25 for the quarter 3 as we go ahead. We expect a healthy domestic demand in H2. And this, along with the positive pricing momentum should actually help our margin expansion in the second half.

To conclude, India has become a major contributor of growth in the global economy, offering a multi-decadal opportunity. This is true of the Indian steel industry as well. Out of the total demand of the rest of the world, which has been given by World Steel of 29 million tonnes expected in this calendar year, 40% plus is coming from India.

We expect strong domestic steel demand in H2, driven by the pickup in CapEx by the government and private CapEx as well. It will be aided by a better monsoon and rural recovery. RBI stands to neutral, should be positive and should stimulate interest rate cuts in the coming months, and that would be stimulating investment and consumption in the country at large.

China stimulus remains a positive development. We have to monitor their exports, which remain a key concern for the global steel industry. Looking ahead, JSW Steel's performance should be better in H2 with new volumes coming in from our new capacities. The price momentum looks better, lower coking coal costs and higher volume should aid overall EBITDA for the second half.

Thank you, and we look forward to your questions.

[Operator]

[Operator Instructions] The first question is from the line of Amit Dikshit from ICIC Securities.

[Amit Dixit, analyst]

Good evening, everyone, and thanks for the opportunity. Congratulations for a good set of numbers in a very challenging quarter. I have 2 questions. The first 1 is on essentially H2 outlook. While you have outlined that things look better, but of late, we have seen NMDC taking iron ore price hike, which is not fully reflected in the steel price hike, at least in flat.

So just wanted to understand how the spreads could improve in H2, regardless of coking coal advantage that you mentioned. And similarly, we have retained our volume guidance -- but the outlook -- but for achieving that, the rate has to be very steep. So just wanted to understand the overall confidence on that. That is the first question I have.

[Jayant Acharya, executive]

So a question on basically the H2 outlook and improving basically, margin improvement. So from the NMDC price, iron ore price side, you're right, the prices have been increased and very quickly 2x, which was -- actually, we feel not warranted in this pricing scenario. Typically now since NMDC is a steel producer as well.

However, internationally, the way we look at it is that the prices inched up after the China stimulus on the iron ore side, but has now again moderated a bit. We feel the domestic iron ore prices will also moderate from the increase announced by NMDC in this month. Having said that, we have certain inventories with us. Certain -- I would say, certain one-offs of the last quarter, which impacted cost will not be there this quarter. That would be positive.

Coking coal, $20 to $25 may be a positive. So these will reduce our costs going into quarter 3. On the price side, yes, I think we have taken a price increase, both in flat and long -- we feel that the pricing in September had gone down steeply on the back of international drops. This has improved in terms of sentiments I think the channel stocks had reduced.

So restocking demand and demand from the institutional customers have improved. And if you see our commentary, I think while retail was impacted by import sentiment, exports were lower, but our institutional sales even for the first quarter as well as for the first half were actually very strong. Our institutional sales numbers for first half where, again, the highest ever and grew by 15%.

So our focus on this remains extremely strong. We expect now retail restocking to start pricing, we feel will remain positive because of a seasonally stronger quarter 3 and quarter 4. So that with aid margin expansions as we go into H2.

[Amit Dixit, analyst]

And volume, sir?

[Jayant Acharya, executive]

From a volume perspective, we are retaining our guidance for the overall volume 27 million tonnes of sales and 28.4 million tonnes of production. I think we'll be, by and large, now on track to achieve with the new capacity is coming on stream.

[Amit Dixit, analyst]

The second one is on the recent acquisition that we announced of this Thyssenkrupp steel in India and that CRGO capacity. So is it possible to share some more contours around that? What is the current capacity there? How much capacity -- whether there is a scope to increase the capacity in the future so what is the current EBITDA margin? And what is the likely margins you can look at in the future? If you can just give some broad contours, that would be great.

[Jayant Acharya, executive]

I'll be able to give you broad because the -- there are still certain subject to approvals in the process. But a CRGO facility in -- as an asset is a very critical asset for the country at large because CRGO is a very critical material for transformers and generators. We already are facing a shortage and the government of India is also very keen that this product is made in India because it is primarily reliant on imports.

I think about out of a demand of about 300,000 tonnes plus, about 100,000, 120,000 is supplied from India. The balance is imported. This demand is growing quite fast overall globally and in India as well. This CRGO facility has a technology with JSW Steel has acquired and that will be housed in JSW steel, while the joint venture has acquired the facility at Nasik.

So this gives us a technical edge from a technology point of view as this technology is available with you in the world. From a margin perspective, I would just say that this particular product is advanced technology product -- so the prices are naturally higher since the investment is much higher, and the margins, therefore, will be better. The capacity currently is at about 50,000 tonnes.

We have enough land and we have enough possibility to expand. Our aim is that we would take this capacity up in the next 1 or 2 phases and increase this capacity. We will be able to give you some more color as to what once we go in fully and get in the full approvals in place.

[Operator]

The next question is from the line of Alok Deora from Motilal Oswal.

[Alok Deora, analyst]

Just a couple of questions. So first is the debt has increased in this quarter. So just wanted to understand -- where do we see -- how do we see the debt moving ahead by the end of this year and next year?

[Swayam Saurabh, executive]

So debt has gone up. This is Swayam here. Debt has gone up by almost INR 5,000 crores to INR 85,000 crores odd. That is primarily because of some cash, which is locked in working capital, which Jayant explained initially. There is also 2 one-off cash outflow. We had -- we paid dividend as well as we did an acquisition. So these are the basically main reasons why debt has gone up.

Going into quarter 3 and quarter 4 with additional volume coming in, the debt in absolute terms should start to taper down. We are committed to the net debt-to-EBITDA ratio, which we have been communicating for last few quarters. Goal in midterm will be to bring it down to below 3%, ideally, between 2.5% to 3%. But debt in absolute terms should start to taper down.

[Alok Deora, analyst]

Sure. And just on the NSR. So what we understand is that the prices have firmed up in October and even next month, some companies are looking to increase prices -- but imports continue to remain elevated, which would kind of continue till November. So how do we see the NSR moving? Could it be more like just a INR 500,000 kind of increase? Or could we see a sustained increase ahead in NSR as the demand picks up? Just some color on that.

[Jayant Acharya, executive]

So I think, Alok, the point to understand is that the prices from the beginning of this April to September closing has fallen quite sharply. So today, the price levels at which most of the steel companies have been operating is not really sustainable. Therefore, we feel the prices have bottomed out. And now is going for an increase, which is mostly a natural increase, which was due.

The demand in the second half because of a strong second half quarter, as I explained, will be a tailwind, naturally. And that, I think, usually in January, March, December, January, we do see price pickups normally happening. We have taken an increase in October for flat steel and long steel both. So we -- it varies in the range of 1,000 to 2,000 depending on product to product. We are quite confident that this price increase will be sustainable. Cost will go down. So therefore, to that extent, in the quarter 3, we will see some better spread.

Iron ore price increase is -- which has happened recently, is 1 area which we need to watch. We will see a coking coal decrease, which will help us in the cost. Other drivers of efficiencies will also help us. So we'll keep an eye on the iron ore side as we go along into H2.

[Alok Deora, analyst]

That's it from my side.

[Jayant Acharya, executive]

I would just like to add is that -- our mining operations in Karnataka where 2 mines and go up, which will start the BPSL mine at Netrabandha, which will start, these will automatically be much closer geographically and will give us a better product at a lower price, then that automatically will aid our overall iron ore average price.

[Alok Deora, analyst]

Sure. So that will come by from Q4 onwards, is it?

[Jayant Acharya, executive]

Yes. So yes. So as we said, the BPSL Netrabandha mine, the Goa mine and 2 mines in Karnataka. These mines we are expecting in Q4.

[Operator]

The next question is from the line of Sumangal Nevatia from Kotak Securities.

[Sumangal Nevatia, analyst]

My first question is on 2Q earnings. I just wanted to understand the movement quarter-on-quarter on realization and cost a little bit better because both realization and cost reduction is much sharper than what we were anticipating. So just if you could explain the movement?

[Jayant Acharya, executive]

So basically, the mix of iron ore and coking coal, as we said, coking coal costs have gone down by about $27 per tonne. We have been able to lower the iron ore cost as well through a better mix of captive, reducing the logistics movement cost in our overall ecosystem for iron ore.

Our overall cost of power and stores and spares both have come down, and our inventory impact also has been positive -- has been lowered. So therefore, I think all this combined has resulted into this number, which has offset the drop in NSR in overall.

[Sumangal Nevatia, analyst]

Okay. Understood. Understood. With respect to iron ore, is it possible to share what is our this year mix of captive versus outside purchase maybe for the first half? And over the next 1 or 2 years, how are we seeing this change? And is it possible to quantify versus market purchase, how is it impacting our financials? Is it at the margin slightly negative and eventually with slurry pipeline, et cetera, turned positive or today itself, it is positive.

[Jayant Acharya, executive]

Our captive use in this quarter has gone up slightly even on an increased volume of production. Our captive use was 41% versus 38% last quarter. So as we scale up our own mining assets, as we explained various assets, we will increase our captive views. But also keep in mind that our expansion. So our absolute number of iron ore from our captive will increase. But as a percentage, it may vary because as JVML capacities fully ramp up,and BPSL capacities fully ramp up. The percentage may differ a little bit from quarter-to-quarter.

But on an absolute number basis, yes, it will -- our captive will keep increasing. Karnataka, as we said, we are hopeful to do 15.5 million tonnes from our own mining operations that, let's say, 15 million plus there. Orissa, even after surrendering Jajang, we have enough in the remaining 3 mines to be able to service our Eastern assets as well as move something to our Dolvi asset.

This slurry pipeline, which is already doing good progress, out of 300 kilometers, I think we have laid almost close to 170 kilometers. And I think we have welded closer to 190 kilometers already. So that's a positive. This slurry pipeline would reduce our cost by about INR 1,000 a tonne as we had guided last time, INR 900, INR 1,000 a tonne.

Our mines in Goa, as we said also, the first 1 will start off soon. That will again go to Dolvi. That would again help the Dolvi cost. And the new mines in Karnataka, those 2 mines, which will at least start in the quarter 4 will again be positive for our own captive in Karnataka. So it will reduce logistics costs for us in Vijayanagar.

It will reduce logistics cost in Dolvi because of the slurry pipeline. And please take into account that this cost of slurry pipeline reduction of [ INR 900 to INR 1,000 ] is on iron ore. So you have to put a multiplier impact for steel. And similarly, the asset quality because the new mines which are coming is of slightly better qualities. So therefore, the quality of iron ore input will be better, that should be positive for fuel efficiencies.

[Sumangal Nevatia, analyst]

Okay. So I mean in FY '26, '27, what is the quantum volumes, captive volumes are we looking at? Is it north of 30 million tonnes or something?

[Jayant Acharya, executive]

It should be more. I think we are probably -- yes, we will give you that color a little bit separately through the investor group, but it will be more than 30 million for sure.

[Sumangal Nevatia, analyst]

Understood. My next question is on coking coal.

[Operator]

Mr. Nevatia, request you to please rejoin the queue. The next question is from the line of Ritesh Shah from Investec.

[Ritesh Shah, analyst]

A couple of quick questions. The first is you indicated on the working capital release in the second half, would it be possible for you to quantify the number, please?

[Jayant Acharya, executive]

Yes, we'll not be able to do exact quantification, but it could be in the range of -- it could be INR 1,500 crores to INR 2,000 crores.

[Ritesh Shah, analyst]

Okay. So despite, say, if we assume it to be -- even on the higher side, we are indicating that we will go ahead with the residual CapEx after taking it down to 16, and our net debt will reduce into the second half. Is the reading correct?

[Jayant Acharya, executive]

Correct. Because second half, the volumes will go up. We have just guided that we'll hold full year guidance that automatically means H2 volume will be higher, and that would mean incremental absolute EBITDA, which is going to be higher.

[Ritesh Shah, analyst]

Sure. My second question has 2 parts. One is for -- I think both are for Jayant sir. One on iron ore and second is on coking coal. Iron ore, Jajang, sir, can you please take us through the underlying reason why we are surrendering? I understand we have indicated nonviability. Was it just because of the sizing or was it the distance of the mine from the plant because the premium what we have paid over here, I think it's lower than few, a lot of other mines that we have paid for.

So that was one. And secondly, on coal, possible to quantify some numbers on Illawarra tonnage, and the total investment that we have made right now, incrementally, what is expected. And you indicated on sales around 2 million tonnes. What is the sort of pricing? And by when do we see the benefits of this?

[Jayant Acharya, executive]

Yes. Okay. On the first one on Jajang irone ore mines. Jajang iron ore mine, I think we bid at a time, a slightly higher premium. I think it was 110% odd plus the priority, a bit premium, et cetera. So total 127%. And there was also a rail siding in that asset, and that was one of the reasons also it was helpful to move material.

But over a period of time, what happened is that this particular asset was already used by the earlier lessee for the higher grades and what gradually got left behind as the lower grade. So as we started mining in the first 1, 2 years, the rates of the higher level got finished and the lower grades came into surface -- they have high alumina, high silica both.

So from a usability perspective, it was more difficult. So it was becoming uneconomical to really run it. We had to export a quantity from here as well to be able to make up our MDPA. So we did not see economic sense in continuing it, and that is why we decided to surrender. We have enough assets in Orissa right now to be able to meet our requirement there.

Also, this life of this mine also, which we had were only 2 years was left. So therefore, from a life perspective, also, we did not have a long time.

[Ritesh Shah, analyst]

Sure, sir. And then on coal?

[Operator]

Sorry to interrupt, Mr. Shah, may we request you to please rejoin the queue.

[Jayant Acharya, executive]

I will just answer the question on coal, which you had already asked. On the coal side, coking coal, Illawarra, we have taken a 20% look through interest with an investment of $120 million. The offtake arrangement of about 1.2 million tonnes plus will start in FY '26. This is a prime low-volatile coal which will come to us, which has been one of the volatile from a price perspective product.

So better control of this asset will provide better stability to us. The coking coal auctions in which we have recently acquired 2 million tonnes is the other question, I think, which you asked, is basically through an auction process, which is for 15 years, and this is on raw cooking coal -- this net of yield will give us clean coking coal of approximately $1.1 million.

Our current assets in the 3 mines, which we have should give us about $1.6 million. So both put together, we should be getting from domestic coking coal assets about 2.7% and 1.2% to 1.3% from Illawarra. So typically, about 4 million tonnes of coking coal. We have, by and large, been able to secure. That is the overall scenario for you.

[Operator]

The next question is from the line of Ashish Kejriwal from Nuvama Institutional Equities.

[Ashish Kejriwal, analyst]

My question is on iron ore. Is it possible to share how much iron ore we produced this quarter and last quarter? Because I understand that mining royalties paid on the iron ore, what we produce and maybe because of this fact, if you look at on a per tonne basis, our EBITDA per tonne seems to be much higher than what it was expected. So is it possible to share that number, sir? That's my first question.

[Jayant Acharya, executive]

Yes, just give us a second. So from a production perspective, last quarter, our production was about 6.7 million tonnes, which was higher because we had to complete the MDPA especially for Odisha. In this quarter, our numbers are lower at about 5.1 million, 5.2 million tonnes because our MDPA requirements have been completed especially for the Odisha mines and therefore, the volume is slightly low.

[Ashish Kejriwal, analyst]

So sir, if you look at your mining royalty this quarter, -- is it just because of this lower volume or our royalty rates have also reduced and which will increase going forward. So what essentially I mean to ask is that the EBITDA per tonne outlook which we are seeing -- giving have we factored in the cost increase according to the captive iron ore or mining royalty included in that?

[Jayant Acharya, executive]

So basically, lower volumes for sure is what I just mentioned. And IBM prices had dropped, so that resulted into lesser outflow on the royalty side. These were the 2 factors.

[Swayam Saurabh, executive]

And just to add lower volume on Odisha side reduces this cost.

[Jayant Acharya, executive]

We really reduced our Karnataka volume. That's what...

[Ashish Kejriwal, analyst]

Sir, because when I'm looking at from first quarter to second quarter, even if I include your total raw material costs and mining royalty,on a per tonne basis and compare it with the first quarter, it seems to be lower by around INR 5,000, whereas you mentioned about coking coal, which is around $27 and some a bit of lower iron ore price. So I was just trying -- I'm unable to get the delta which I think someone else also asked for this quarter?

[Jayant Acharya, executive]

I think maybe our investor team can separately understand and explain to you, but lower exports of iron ore is something also which you have to take into your calculation because last time to complete the MDPA by June, in Odisha mines, there were some exports, which were at a lower number, and that again had an impact.

So last quarter, if you remember, we said that the mining impact was more, which this quarter has gone down. So factors are basically lower volume. IBM prices, which had rolled down, so therefore, the royalty premium value terms was lower and lower exports of iron ore, which was actually sharply down. So [ 2.3 million, 2.4 million ], if I recall, which has come down in this quarter 2 to hardly [ 0.2 million ]. That was the main reason.

[Ashish Kejriwal, analyst]

My second question is on account to prices, you highlighted that in October, we have taken a price increase. And as well as you have mentioned that in second half, we can increase our volumes and if I'm looking at a run rate should be more than 15%. So here, my question is, one, the blended iron ore -- blended steel price in October is in flat products. Is it higher or lower than our Q2 average? That's one.

And secondly, when we are talking about India appliance steel consumption, we have seen that it has increased by around 11% Y-o-Y, whereas even our domestic sale has increased just by 1% -- so even if second half, how we are going to have 15% or 17% increase in volume growth? That's my question.

[Jayant Acharya, executive]

Let me answer your second part first. I think when you are looking at Y-o-Y, we had a liquidation of inventory on a lower production in the quarter before quarter 2 '24 due to which the base was higher and that's why you saw a 1% increase. Whereas on a quarter-on-quarter basis, our sales basically were up in the domestic by 4.8%, close to 5% as against the India domestic growth of about 4%, 4.2%.

So we are still doing well on that front. On the first half of this year also, our domestic sales, as I mentioned, was quite strong and the growth was quite strong. Going forward into the NSR, it's difficult to give the full details in 1 of this thing. But let me put it this way that we have taken a price increase, as I said, for flat and longs both. We expect that the prices, which were very low in the month of September will -- will not be sustainable, and therefore, the increase is something which is real and should be sustainable. This is one positive. The cost on coking coal will go down, and that would help.

On an average, the NSR by and large, for quarter 2 and quarter 3, we would expect that we will be close in terms of stability on an average for quarter 2, although we exited at a lower September rate, but on an average basis, we'll be better because the product mix and the price increase which we have taken, both.

[Operator]

The next question is from the line of Kirtan Mehta from BOB Capital Markets.

[Kirtan Mehta, analyst]

We have indicated growth rate for several category of sales like institutional segments in Solar, LRPC and Wire Rod which are quite strong. Would we be able to indicate some quantum about this segment as well, how much they contribute -- volumes they contribute?

[Jayant Acharya, executive]

So it would be difficult to give you product-wise segment-wise. But from overall, as I said, the institutional was very strong for the first half in which the institutional, we said our auto sales was positive. It grew by 6% Y-o-Y in the first half. Our solar sales were positive they grew by 90%.

Our overall renewable energy grew by 32%. If you were to look at solar and wind. Appliances grew by 65% Y-o-Y. Our branded sales have been stable in spite of the overall retail being impacted. Our branded sales grew marginally -- modestly in good branded products. So by and large, I think we'll be able to give you this flavor.

Our exports have been down. That has been the major challenge, but I think we should look at it this way that -- we have aligned our production and sales to the domestic market because the growth in the domestic market was very good, 13.5% growth in the first half of this year, which enabled us to reduce our export which also was affected by a low demand and a low pricing environment. So that has again been a positive.

[Kirtan Mehta, analyst]

Sure, sir. And second question is about basically in the quarter 2, while domestic sales growth was around 12% Y-o-Y at the country level, our growth was around 4%, 5%, which are the segments where we would have lost the market share?

[Jayant Acharya, executive]

Sure. Domestic growth, 12%, you're talking about the Y-o-Y again, right?

[Kirtan Mehta, analyst]

Yes.

[Jayant Acharya, executive]

So here, basically, the way I think you have to also look at it is between also flat and long separately. In the flats, our market shares are more or less stable. In longs, we are doing quite well, but our volume is 25% in our overall mix, 75% is flat. The main reason where we lost a little bit of market share is in the flat, which was primarily because of import.

Import moved, as we said in this particular quarter to 3.2 million odd tonnes, and that was an increase over the last quarter. And our exports also reduced marginally. So these 2 combined had an impact of almost 1.2 million tonnes as a country, I'm talking overall. So reduced exports by about 200,000 tonnes and exports going up -- sorry, exports going down by 200,000 tonnes and import going up by 1 million tonnes. So 1.2 million tonnes incremental availability.

So imports basically replaced some part of the domestic demand. That impacted the share flat, I think, overall. Other than that, I think we are, by and large, good in the country.

[Swayam Saurabh, executive]

If I can just add. Last year, quarter 2, as Jayant mentioned, we did almost 2.5 lakh tonne of inventory liquidation. So if you look at last year quarter 2, both production and sales were at 6.34% at consolidated level. If you exclude the base dilution impact, the growth in domestic will be actually 7.5%.

[Jayant Acharya, executive]

And also, I think if you look at it from overall quarter-to-quarter perspective, the domestic India grew by 4.2%, where we grew by 4.8%. So this -- apart from this one-off which Swayam explained, which is a variation in Y-o-Y you see quarter-on-quarter, whatever India has grown, I think we have done better.

[Kirtan Mehta, analyst]

Understood, sir. Just 1 question on the CRGO steel. Some of the Chinese companies have been indicating margin in the range of $1,000 per tonne. So would we be able to capture the margins in that range for our facility as well.

[Jayant Acharya, executive]

So I would not like to comment at this stage on exactly giving you the margin, but directionally, I think this is a very high-margin product and absolutely right. So this is something which gives us a little bit more time to complete all the processes which are in the system, then we'll be able to give you some more color.

[Operator]

The next question is from the line of Amit Murarka from Axis Capital.

[Amit Murarka, analyst]

So my question was around...

[Operator]

Amit, can you speak a bit louder. We are unable to hear you clearly.

[Amit Murarka, analyst]

Is it better?

[Operator]

Yes, please go ahead.

[Amit Murarka, analyst]

Yes. So my question is around the overseas businesses. So like I think second half of last year and earlier this year also, we are seeing better profitability coming in from [indiscernible] as well as Plate & Pipe Mill. So could you just help us understand as to why things have deteriorated so much? And is this a new normal situation?

[Jayant Acharya, executive]

As far as our subsidiaries in U.S. is concerned, I think Ohio impact, I mentioned there was a shutdown which was not planned maintenance shutdown, which we had to take that resulted in lower volumes. The lower pricing environment overall internationally also affected the prices.

Baytown, while it posted a positive EBITDA was lower than the previous quarter. But overall, because Ohio impact was more, there was a loss. In Italy, EUR 6.2 million of EBITDA, slightly lower than the previous quarter, but the volumes were better. The prices were lower because of the international price scenario in general. Italy will continue to remain, I think, in terms of volume, it will remain good. I don't see a problem -- because from an asset side, it's a rail asset, which is primarily driving the volumes, and that has a strategic content and therefore, will continue to remain in good demand.

And I think the pricing will be better than other products per se. As far as U.S. is concerned, I think we have seen a price improvement in Ohio, primarily because of the international market post the China stimulus and U.S. has also improved. The post the shutdown, the facilities have started again. So the volume part in Ohio in this half will be back to normal.

Baytown, the plates prices haven't improved as much as yet, but we are expecting some improvement as we go into quarter 4. It would be -- I would say it will be better than what we have performed in quarter 2, for sure, but I would not be able to hazard a guess right now and give you a number on what kind of numbers could come.

[Amit Murarka, analyst]

No, I'm not looking for a number. I'm just trying to understand like you did about $100 million EBITDA in the Plate & Pile Mill in '23 and about $110 million in '24 and versus that offload...

[Jayant Acharya, executive]

Little bit pricing -- basically the pricing. So the prices, if you really look at, if the prices of the coils went down from, whatever, $900 plus to $600-plus per net tonne, which happened in U.S. And then it has climbed now to again over $700 per tonne. So pricing really destroyed your margins, even plates if we were to look, I think, on a Y-o-Y basis, the pricing for plates have also come down.

So Ohio, if I see on a Q-o-Q basis itself, price have come down by 15% in Baytown, it had come down by about 10%, close to that. These are CRU numbers. So that was a basic impact. I think the pricing scenario now is improving. That will aid the margins to improve.

[Amit Murarka, analyst]

Sure. And just lastly, on the guidance, I think coking coal, you said $20, $25 for Q3, right?

[Jayant Acharya, executive]

$20 to $25 for Q3, yes.

[Operator]

The next question is from the line of Raashi Chopra from Citigroup.

[Raashi Chopra, analyst]

Just following up on a question asked earlier that there's big delta on the realization per tonne differential between the first quarter and the second quarter as well as the expenses in the sense that the realization declined by about INR 3,000, but if you actually divide the revenues by the volumes that number comes closer to INR 6,000. So is this whole thing explain both on the revenue and the cost side by lower iron ore exports?

[Swayam Saurabh, executive]

Yes. Iron ore export -- lower iron ore export is 1 big reason. But broadly, the INR 3,000 delta we negated that Jayant explained almost INR 950,000, which is a combination of lower iron ore cost as well as lower Odisha losses. Then we had got in about $27 gain on coking coal. And we also saw other type of example, steam coal prices coming down. A number of other let's say, efficiencies which -- and lower inventory losses, which actually helped us cover the last INR 1,000. That's broadly what the split is.

[Raashi Chopra, analyst]

And then on the volume targets that you maintained, are they maintained individually as well like the Indian operation targets are still like the [ PAT ] target still 26 million tonnes for the year?

[Jayant Acharya, executive]

The overall guidance, which we had given for 27 million tonnes was including consol basically for both and 28.4 million tonnes was also consol including U.S. operations. So both -- but the overall targets will maintain -- and individually, I'm not getting into detail right now, but I think overall, we are maintaining for sure. Because I think I would -- because of the ramp-up of JVML, I'll not be able to give you exact details as to how but 26 million tonnes, as you asked, Indian operations will certainly be there.

[Raashi Chopra, analyst]

Okay. And just 1 last question. Any guidance on the CapEx for next year since you reduced for this year.

[Jayant Acharya, executive]

Since we have reduced it this year. No, actually, CapEx, what we have reduced is basically for 2 reasons. As I explained, 1 was the slurry pipeline transfer and the BF-3 postponement of the CapEx which both these put together have resulted primarily in this number. No critical projects have been cut as yet, we have not done anything like that. So therefore, this INR 20,000 crores to INR 16,000 crores, INR 17,000 crores is only that number. So next year, going forward, our expenditure on Dolvi Phase 3, which is a critical asset which is going on our Coke Oven, our slurry pipeline, our pellet plants in Orissa are all on track. The mining side, beneficiation, mining asset operationalization, CapEx, all on track. There is no change in that.

[Raashi Chopra, analyst]

So the shortfall, this year will just get added on to what you were targeting for next year? Is that a fair assumption?

[Swayam Saurabh, executive]

Not necessarily. I think what Jayant is saying is anything which is critical or would add capacity, we will not slow it down. Exact cash, we'll be able to guide perhaps in a subsequent quarter.

[Jayant Acharya, executive]

Yes. But the slurry pipeline transfer will be permanent because that is something which we are transferring out. So that will not come back. But BF-3, which we have postponed from now to next year, is something which will come as a CapEx next year. So when we take CapEx for next year into account, we will calibrate our CapEx accordingly, keeping that in mind.

[Operator]

Next question we will take is from the line of Ashish Jain from Macquarie.

[Ashish Jain, analyst]

Sir, first, just a clarification on this the Thyssen deal, the technology has come to JSW Steel and the asset has gone to the joint venture. Is that understanding right?

[Jayant Acharya, executive]

Yes. The understanding is right.

[Ashish Jain, analyst]

So what is the like reason behind such structure? Like any -- and what is the outlay for us for acquiring the technology out of that INR 4,000 crores?

[Jayant Acharya, executive]

So without getting into details of the breakup at this stage, but we basically wanted to acquire the technology and have it in distributed steel because CRGO, as we said, is a technology which is available with a few. It's an advanced technology. We wanted to house in JSW's Steel. JFE already has a CRGO technology in Japan. So therefore, for them, it was not required to house it in the joint venture.

[Ashish Jain, analyst]

Okay. Okay. Got it. Sir, secondly, in terms of the price outlook, just to clarify, you did say like we know September exit prices were pretty weak. And while we have taken as an industry, some price hike in October, do you expect Q3 realizations would be better sequentially. Is that what you referred to earlier in your comment.

[Jayant Acharya, executive]

No, I'm not saying that. Yes, I think that's a point which is good to clarify. No, I'm not saying that. Basically, what I'm saying is that the September exit was weaker. The Q2 average was a little higher because the September fall was deeper. The increase which we are taking or which we have taken in October and a change in the product mix, which we expect should enable us to get to a similar average as quarter 2. So therefore, the fall, which has happened in September, to that extent, basically, we are trying to see how to make up through a mix of price and product mix.

[Ashish Jain, analyst]

Got it. Got it. And sir, lastly, can you just quantify your EBITDA per tonne for Q2, given all this confusion on price decline and cost decline, which has happened this quarter. Can you just quantify the EBITDA per tonne for Q2 standalone.

[Jayant Acharya, executive]

EBITDA per tonne for Q2 for stand-alone was INR 8,765 crores.

[Operator]

Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to the management for closing comments.

[Jayant Acharya, executive]

So thank you very much for being here today. As we said here that India continues to be a strong growth area internationally, globally. It's a bright spot. We have seen the steel demand growing very well.

First half, 13.5%. Keep in mind that the elections and the weather disruptions disrupted. In spite of that, we ended the first half with a 73 million tonnes odd demand. The second half is usually better. Last year, we ended the second half at 73 million tonnes, which we have done in the first half itself. So we are expecting that this year, the demand will finish at a range of 150 million or so.

Our total volumes from our new capacities will go up in H2 that will help us to play into this demand and that will give us an improvement in our absolute EBITDA numbers. On a product mix point of view, we have some downstream capacities which will be utilized now with the HSM 3 coming in. So the product mix also will go into some bit of value-added.

Our iron ore mining operations will start in our Goa mines, our Netrabandha mines in BPSL and Karnataka, which should further aid our cost side. CapEx, we are, by and large, on track to complete all our projects. We expect that this year, we will be able to meet all the guidances which we have given, 27 million tonnes of sales and 28.4 million tonnes of production. The full production ramp-up for the new capacities will play out in FY '26. So outlook, India positive, steel positive, JSW Steel also positive. Thank you.

[Ashwin Bajaj, executive]

Thank you. Please contact us at Investor Relations if you have any further questions.

[Operator]

Thank you. On behalf of JSW Steel, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.