India: Jindal SAW reports healthy Q2FY'22 performance even as price volatility persists

Jindal SAW Limited, leading global manufacturer and supplier of iron and steel pipe products with manufacturing facilities in India, the US, and UAE (the MENA region), has announced its financial results for Q2FY'22. The company has achieved a consolidated topline of INR 3,006 crore and EBITDA of INR 411 crore.

New orders worth INR 2,100 crore have been received primarily from the water and industrial sectors.

The HSAW sector, which has a thin margin market, was the worst hit because of rise in steel prices, EPC contractors putting projects on hold and also the government deferring the contracts.

Going forward, the company sees good visibility in terms of pent-up demand and stability in prices. In the oil and gas segment, ONGC, GAIL and IOCL have many projects in the pipeline and the tenders should be in the market by the end of this year.

The company is looking at 3,00,000 tonne (t) of LSAW export business in the next two years. Also, LSAW export demand in the water segment looks promising. Jindal SAW expects to book new orders incrementally in the coming five-six months.

Moreover, the government's Jal Jeevan Mission will drive future demand in the water segment.

Other Highlights

Market volatility and new orders: Owing to the continuing volatility in raw material prices, Jindal SAW is cautious in booking new orders. New orders to the tune of INR 2,100 crore have been received for ductile iron and large diameter pipes primarily from the water and industrial sectors.

Impact of high prices: The last few quarters have seen a significant rise in the prices of iron ore, coking coal and other inputs. Shipment costs have also increased significantly. The unprecedented one-sided movement has impacted the business and profitability of the company. However, it has an operating model designed to counter volatility and inclement sector dynamics through spread of business across locations, markets, products, and industry usage.

Update on debt position: As of 30 Sept'21, net institutional standalone debt of the company was INR 3,243.5 crore in comparison with INR 2,810.3 crore as of 30 Jun'21 including long-term loans and fund-based working capital. The company maintains sufficient working capital and liquidity to manage its scale of operations efficiently.

Abu Dhabi business: In UAE, the company sold approximately 92,700 t of DI pipes in H1FY'22 as against 72,600 t in H1FY'21. The operations are expected to increase in H2. The current order book is 110,000 t. Significant volatility in raw material prices is likely to impact the business of Jindal Saw Abu Dhabi. However, the company is exploring all possible options to protect margins.