You will see a completely different JSW Steel in 2022: Seshagiri Rao

JSW Steel posted a consolidated pre-tax loss of Rs 643 crore in the June quarter. In an interview, JSW Steel joint managing director and group chief financial officer Seshagiri Rao tells Ishita Ayan Dutt that the future looks better. Edited excerpts:

JSW posted a loss in the first quarter. What is the outlook for the remaining year?

There were a lot of challenges in the quarter. In April, there was a shutdown for 20 days. So, the results are actually for two months of operations.In May and June, we were profitable at the total-cost level.There has been a recovery in demand in India between April and June. In April, the fall in demand was 90 per cent which came down to 45 per cent in June. On the cost side, coking coal prices came down by $40 per tonne. That benefit will flow in this quarter notwithstanding the Rs 200 per tonne increase in iron ore price in July. So, we will have a better cost structure, volumes will increase and product mix will change.

Average capacity utilisation in the quarter was 66 per cent. To what extent was it impacted by Covid cases in Vijaynagar?

In April, it was 38 per cent, in May we went up to 83 per cent, but in June we came down to 76 per cent because of the impact in Vijaynagar. In July, we are over 80 per cent. We will meet our guidance of 16 million tonnes of production for the year.

Beyond 2021, what holds for JSW Steel?

You will see a completely different JSW Steel in 2022. We had four to five months of work left for Dolvi project completion. But at the peak of activity, Covid brought it to a standstill. The number of workers came down from 15,000 to 3,000. We will now use the second half of the year to complete the project. What is interesting is that people are coming back to work. From 3,000 workers in May, it has now increased to 4,900. This quarter, we expect more people to come in. So, we will be able to accelerate our project work and complete it. The outcome is that by the end of the financial year, we will have a capacity of 23 million tonnes. We are expanding downstream capacity from 5 million tonnes to 9 million tonnes. There are also pending acquisitions like Bhushan Power & Steel (BPSL) and the turnaround of Monnet Ispat.

The acquisition of BPSL and Asian Colour Coated are tied in legal knots. What is the current status?

BPSL is in the final lap. It has reached the Supreme Court but because of Covid-19, regular hearings have not happened. We expect hearings to take place and it will be disposed of quickly. Similarly, for Asian Colour Coated, our resolution plan was approved and NCLT (National Company Law Tribunal) hearing is scheduled on Monday. Even that will get closed quickly.

Globally, many steel companies are adopting digitalisation in a major way. What about JSW?

There is a huge digital transformation that is happening not just restricted to manufacturing. There are various digital initiatives that the company has taken. We have implemented digital solutions for procurement. Now, on the sales side, we are looking at a complete contact-free digital solution.
 

What kind of cost savings will it translate into?

The target is Rs 450-500 crore cost saving this year from digital initiatives. The target for next year is Rs 1,000 crore.

Your overseas operations have been a drag and layoffs have been announced at Ohio. What does the future look like?

The operating earnings before interest, taxes, depreciation, and amortisation (EBITDA) loss from overseas in Q4 was Rs 298 crore, and in Q1, it was Rs 247 crore. So it has come down. In the US, demand and prices have fallen. For the first time, prices in the US and Europe are lower than China. Our overall strategy for overseas is to reduce and optimise losses and bring positive EBITDA Q3 onwards.