JSPL Q1 FY18 Results: Reviving Signs, Improving Margins, Easing Debt Concerns
After ten consecutive quarters of losses, the company has not yet projected profit, but what is impressive is the momentum of improvement it is working to gain, on the back of certain factors
Jindal Steel and Power Ltd (JSPL) kick started the first quarter of the new financial year 2017-2018, ending June 2017, with a strong performance. Bringing ease amongst the stakeholders over debt and future growth prospects, the company managed to narrow down the consolidated loss to Rs 420 crore in the quarter ended 31 June 2017, compared to the figure of Rs 1238 crore loss in the year-ago period.
After ten consecutive quarters of losses, the company has not yet projected profit, but what is impressive is the momentum of improvement it is working to gain, on the back of certain factors.
The consolidated EBITDA for the reported quarter, in absolute terms, increased to Rs 1,353 crore from Rs 1,015 crore in the same quarter last year, up by 33 per cent year-on-year. Despite an increase in the working capital, the consolidated net debt of the company remained unchanged at the same level last quarter.
In the power segment, Jindal Power Ltd (JPL) generated 3,186 units in the reported June quarter as compared to 2,171 units in Q1 FY17, an increase of 47 per cent. With an increased PLF (Plant Load factor) of 43 per cent, the company recorded an impressive improvement of EBITDA by 157 per cent compared to the same quarter last year and reached a level of Rs 468 crore.
A cash profit of Rs 310 crore was generated for this quarter. According to an analyst the company benefited from the seasonally strong demand in the merchant market.
“Power demand in the country has remained range bound and could increase manifold once the state distribution companies begin buying more. A lot of this demand has already started to be visible in the short-term markets with spot rates being better than last year. Any uptick in the industrial production post monsoons should further propel the power demand in the country,” mentions the company statement.
The company has a power purchase agreement of 1000 MW with Chhattisgarh, Tamil Nadu and Kerala, out of 3400 MW capacity of its Tamnar plant.
“There was robust demand of power in the southern states of Telangana and Tamil Nadu in the spot market, owing to low rainfall in this region, where we sold electricity at Rs 3.30- Rs 3.50 per unit,” said Ravi Uppal, MD and Group CEO, JSPL, to Financial Express.
JSPL has managed to secure coal linkages of 0.511 Million MT for its captive power plants, which would lead to further security of coal supply as well as reduction of its power costs.
In the steel division, the production rose by 7 per cent in the quarter to 0.90 million tonne. The EBITDA posted a jump of 13 per cent driven by 4 per cent growth in volumes. The company draws majority revenue from the pellet exports to the European countries and with an improving global demand, the price realisation is expected to improve further.
The company is also likely to gain from the new blast furnace (Angul plant) commissioned in May, which would help reap the benefits in the subsequent quarters.
According to Motila Oswal Securities, JSP is likely to benefit from an improvement in the underlying drivers: higher coking coal prices, domestic coal supply, pellet export prices, and domestic long product prices) of earnings growth.