India: Jindal SAW continues to see healthy order book in Q1FY'22

Jindal SAW Limited, a leading global manufacturer and supplier of iron and steel pipe products with manufacturing facilities in India, the USA and the UAE (MENA), expects significant EBITDA above INR 300 crore in the next three years provided there is no third wave disruption.

It plans to expand its ductile iron (DI) pipe business by exploring organic and inorganic growth routes. Currently, the company is receiving orders from Maharashtra, Andhra Pradesh, Punjab, Rajasthan and Madhya Pradesh.

Also, the company is making a conscious effort to expand its product portfolio with value-added items in the stainless division, exotic grades of carbon steel like 13 chrome, 18 chrome and 25 chrome and is confident of a steady performance in the next few quarters on the back of strong capital structure, higher execution and building order book.

Jindal SAW is optimistic of achieving profitability in the coming quarters once the raw material prices soften.

SteelMint learnt the following points via an investors' call by the company.

Highlights

1.Production of SAW pipes: During Q1, the company produced 1,96,500 t of pipes, up 13% y-o-y. There were delays in order execution due to erratic supply of raw material.

However, orders remained fully protected from the sharp global increase in steel and oil prices. The outlined plans for augmenting infrastructure in India are expected to support pipe requirements across oil, gas and water segments which would further support the demand of SAW pipes.

2.Total pipes sales: During Q1, the company sold 2,45,200 t of pipes, up 30% y-o-y against 1,88,400 t in the year-ago period. Quantitative sales of large diameter SAW pipes, LSAW and HSAW, stood at 95,500 t in Q1 compared to 92,000 t in Q4 FY'21 while ductile iron pipes sales stood at 1,02,900 t. The rise in demand from the automobile and power sectors has supported sales for seamless and stainless tubes, reported at 46,800 t in Q1FY'22.

3.Institutional debt: During Q1, net institutional debt (at a standalone level) was around INR 2.8 crore (INR 28,103 million) compared to INR 3.8 crore (INR 38,538 million) in the year-ago period, including long-term loans and fund-based working capital.

4.Healthy order book: Despite Covid-19 uncertainties, during the quarter ended 30 June'21, the company booked fresh orders of INR 24,000 million as against sales of INR 24,174 million. Primarily these orders were related to the water segment.

• With volumes of 0.98 million t (pipes &and pellets), the order book gives comfort for the coming quarters of FY'22.
  
  
• Orders for large diameter pipes will see execution in the next 9-12 months, and whereas those for ductile iron pipes, over the next forthcoming 12-15 months.
  
  
• The current order book includes exports of 18%.
  
  

The DI pipes order book stands at 5,63,000 t giving visibility of more than one year. The government's sustained focus on water resource management and supply is driving orders for new projects.

5.Rising steel prices: Supported by higher pricing for iron ore and metals, the company has continued to benefit in the pellets segment. The pellet business contributed significantly to the company's EBITDA in Q1.

Meanwhile, prices for less than 25% of the order book remains unchanged on the prices fixed earlier. Besides government orders, the rest of the DI pipe old order book has been re-priced and the company has been able to pass on the surge in raw material costs to the customers through price escalation.

6.Update on UAE operations: Despite the production being scaled down owing to Covid-19 disruptions in the Abu Dhabi facility, it has been profitable in Q1 with sales of around 50,217 t (22,388 t for Q1FY'21) ductile iron (DI) pipes for the quarter ended 30 June'21.The current order book is at around 132,000 t.