India: Jindal SAW witnesses robust order book position with good visibility in Q3 FY '21

Jindal Saw Limited, a leading global manufacturer and supplier of Iron & steel pipe products and pipe accessories with manufacturing facilities in India, USA and UAE (MENA), has announced its financial results for the quarter ended December 31, 2020.

Key takeaways from the investors call held on 8th February, 2021 are as follows:

1.Production of SAW pipes-During Q3 FY '21, the company produced 1, 23,000 t pipes as compared to 1, 47,000 t pipes in Q3 FY '20. The production and execution of orders in this segment has seen some delays due to the erratic supply of raw material. However, orders in this segment remains fully protected from sharp increase in the steel prices.

2.Total Pipe Sales-During the quarter ended 31st December 2020, the company sold 2, 77,700 t pipes, down 22% y-o-y against 3, 40,500 t in the year-ago period. The quantitative sales for large diameter SAW pipes-LSAW and HSAW stood at 1,16,500 t in Q3 compared to 1,81,500 t in Q3 FY '20. Meanwhile, ductile iron pipe sales stood at 1, 20,300 t and 40,900 t for Seamless & Stainless Tubes in Q3.

3.The standalone PAT-The standalone Profit after Tax (PAT) stood at INR 681 million in Q3 FY '21, down 43% y-o-y against INR 1,197 million in the year-ago period. The sharp fall in profits was on account of fixed costs not being fully absorbed.

4.Healthy order book-During the Quarter ended 31 December 2020, as against sales of INR 2,176 crore, the company has booked new orders of INR 2,500 crore. The company experienced robust order book position to the tune of INR 1,500 crore. The current order book stands at 3,91,000 t with a visibility of next 12-15 months. The order book comprises of 1,72,000 t of HSAW and 2,19,000 t of LSAW (HSAW orders are largely from the domestic water sector). The orders for Large Diameter Pipes are expected to be executed in next 9-12 months. Current order book includes exports of 20% in case of Ductile Iron Pipes. Jindal SAW continues to benefit from a higher share of orders from private players and EPC contractors.

5.The impact of raw material prices on ductile pipe segment-Sharp increase in iron ore lump prices has impacted the profitability of Ductile Iron Pipe segment which will most likely get adjusted in the coming quarters owing to improved pricing of new DI orders. Jindal SAW anticipates that the iron ore and steel prices may rationalize gradually. Moreover, the Jal Jeevan Mission will foster good demand for iron ductile pipes.

6.Update on the Institutional Debt-The company's overall debt position has improved from INR 3, 700 crore last year to INR 3,300 crore in Dec '20 and currently it's at 3,100 crore. The company is taking steps to reduce its indebtedness.

7.Current scenario of UAE plant-UAE operations have improved and have become profitable in FY '21. UAE has sold approx. 138,000 t DI Pipes for 9 months period ended 31st Dec 2020 and the current order book is approx. 145,000 t. The paradigm of Abu Dhabi operations has been broken and taken to the next level. In the last quarter, the contribution of EBITDA from Abu Dhabi operations was about INR 60 crores and this trend is likely to continue. The company witnessed more than 70,000 t despatches of pipes from the Abu Dhabi plant in Jan '21. Oil price stands at above $50 in Abu Dhabi leading to overall improvement and robust demand.

8.Subsidiaries contributed INR 130 crore this year-Despite Covid-19, the subsidiaries contributed significantly-INR 14-15 crore at EBITDA level. Overall contribution by subsidiaries and promoters stood at INR 130 crore.