Dear Stakeholders,
It is with great pride and pleasure that I report to you at the
end of a very successful financial year that saw us report
market-leading numbers, together with the triggering off of
multiple strategic initiatives aimed at realising our long-term
vision.
During the year, we launched our revamped Group brand
identity. Elucidated through the tagline, ‘Better Everyday’,
our new brand positioning is all about being ‘a bold and
unwavering transformer’. It demonstrates our drive to make
‘better’ every life we touch; be it our employees, our business
associates, our customers, the communities around our
plants and facilities, or the industry fraternity at large. And
we do so by following the principle of bettering ourselves,
time and again, continuously, with dynamic enthusiasm.
Further, to establish this culture and create a consistent brand
experience, both for our internal and external stakeholders,
we are adopting a personality that is optimistic, empathetic,
nationalistic and bold.
Thus, our credo borrows from the actions and outcomes we
have demonstrated. In JSW Steel too, we find resonance of
‘Better Everyday’, in the manner that we have performed, and
in the strategic focus we have outlined. We can only get better
if we pursue excellence across all facets of our business on a
daily basis, and therefore, this annual report highlights some
of the ways in which we are aiming for excellence.
This is our first Integrated Report. Creating value for all
stakeholders and providers of diverse capitals is inbuilt into
our strategy, and the way we measure our performance. Our
report now reflects the outcomes of our actions, as relevant
to different stakeholders, and the impact of our strategy and
integrated thinking. It is also in-line with our commitment to
the highest standards of governance and transparency.
An Encouraging Environment
FY18 was characterised by broad-based improvement in
global growth, rising industrial production, kick-starting of the
supply side reforms in China and uptick in global steel pricing
environment.
In 2017, global economy grew at 3.8% which is the fastest
since 2011. This growth was an outcome of a combination
of factors namely higher investments, favourable monetary
policies and buoyant global trade. The International Monetary
Fund (IMF) expects this momentum to continue and has
forecasted that global economy could grow by 3.9% in 2018 as
well as 2019.
The Indian economy too saw a strong rebound in demand,
especially in the second half, demonstrating a healthy
resilience to disruptions and structural changes. India’s
macro fundamentals, such as fiscal deficit and credit rating
are improving, and broad-based financial reforms are being
undertaken through initiatives such as relaxation of FDI rules,
enactment of the IBC and growth stemming from government
spending. Although the GDP growth at 6.7 per cent was a tad
lower than the 7.1 per cent achieved in the previous fiscal, it is
a remarkable achievement given the context of reform. Growth
is expected to rebound to 7.4% in fiscal 19, driven by multiple
internal and external factors.
THIS IS OUR FIRST
INTEGRATED REPORT.
CREATING VALUE FOR
ALL STAKEHOLDERS AND
PROVIDERS OF DIVERSE
CAPITALS IS INBUILT INTO
OUR STRATEGY, AND THE
WAY WE MEASURE OUR
PERFORMANCE.
DURING THE YEAR, OUR CONSOLIDATED REVENUES
GREW 18.1% — SUBSTANTIALLY OUTPACING THE
DOMESTIC INDUSTRY STEEL CONSUMPTION
GROWTH OF 8.1% AND GLOBAL CONSUMPTION
GROWTH OF 4.7%.
For the first time in many years, elasticity of steel demand to
GDP growth exceeded 1x. Infrastructure received a big boost
in the form of budgetary allocation, and consumer sentiment,
too, is on the rise. We also crossed the GDP threshold of $2.5
trillion, there is likely to be a huge thrust on infrastructure
development, which is very positive for steel demand growth.
In addition, the introduction of GST, is a seminal reform, which
will help formalise the economy, introduce transparency and
go a long way in creating a level-playing field, besides weeding
out a lot of tertiary inefficiencies. We view this very positively.
Of particular importance are the initiatives around stressed
assets resolution, under the new Insolvency and Bankruptcy
code. JSW Steel is participating in strategic opportunities
under this process, and is hopeful that quality, efficiency and
governance will converge to make better utilisation of some of
the capacities that are financially encumbered.
Setting New Milestones
JSW Steel achieved a record performance in the year. With an
all-time high crude steel production of 16.27 million tonnes,
our shipments remained buoyant. Revival in domestic demand
in the second half of the year was a key catalyst of our
performance and was driven by improving prospects of the
auto, construction and capital goods sectors. Rising share
of value added products in the overall business was another
highlight of the year. These products contributed 58% to our
revenues as compared to 34% in FY17 and were instrumental in
boosting our realisations as well as profitability.
During the year, our Consolidated revenues grew 18.1%
- substantially outpacing the domestic industry steel
consumption growth of 8.1% and global consumption growth of
4.7%. Thus, we continued to further consolidate our leadership
position in the market.
Our consolidated EBITDA stood at `14,794 crore - an increase
of 21.5% over the previous year. Shift in product mix towards
high-margin value added products was a key enabler for this
growth.
We reported our highest ever profit after tax at H6,113 crore
- a growth of 76.3% over the previous year. Our relentless
efforts to enhance operational efficiencies are yielding rich
dividends as reflected in our robust return on capital employed
(ROCE) ratio of 16% - placing us among the top 5 ROCE steel
companies globally. De-leveraging was a key theme that played
out during the year. Consequently, our Net Debt to EBITDA fell
to 2.59 times as against 3.20 times in the previous year. The
cash flows freed up from the de-leveraging initiatives will be
deployed for capacity expansion and other capital intensive
projects, going forward.
An Exciting Future
We are very positive about the long-term growth potential
for steel consumption in the domestic market. Even if one
assumes a nominal rate of growth for the overall steel demand,
India will need to create at least 150 million tonnes of new steel
capacity in the next ten years. As one of the most competitive
and efficient players, naturally, JSW Steel, will be looking to
capitalise on this opportunity and invest in capacity expansion
and market share.
Our Board has approved additional capital expenditure
programmes to expand capacities at our plants in Vijayanagar
and Dolvi and also to modernise and expand capacities of our
downstream business. These expansions will further enhance
our efficiencies and generate superior returns at lower costs.
Inorganic growth has always been an integral part of our
growth journey and we will continue to explore strategic
opportunities – both in domestic and international markets.
In the domestic market, your Company has emerged as the
successful resolution applicant for acquiring Monnet Ispat and
Industries Limited, a 1.5 MTPA steelmaking facility in Raigarh,
Chhattisgarh. Located in close proximity to the mineral rich
belts of Chhattisgarh and Odisha, this acquisition will be
crucial in furthering our footprint in the central and eastern
markets of India.
Limiting the Impact of Rising Protectionism
Global economies are increasingly stepping up protectionist
trade measures to safeguard the interest of their domestic
industries. While this trend could continue in the future, it
will not hinder our growth in the international markets. This is
because we have selectively pursued some value-accretive
acquisitions in the overseas markets during the year with
the objective of replicating our low capital cost model in a
relatively higher operating cost environment.
Accordingly, we have acquired an 83% stake in US-based steel
plant Acero Junction Holdings for $80.85 million (~`550 crore)
recently. This acquisition will further bolster our manufacturing
presence in the US market. Similarly, we are in the process of
acquiring the facilities of Italian steel maker Aferpi (erstwhile
Lucchini) for `440 crore. Through this acquisition, your
Company will get a stronger foothold in the European market
and can swiftly tap into the emerging opportunities in the
continent.
Favourable Policy Environment
The Government of India has put in place multiple policies to
support the domestic steel industry. Be it long term measures
such as the National steel Policy which aims to make India a
self-sufficient steel producing country by 2030; or shorter term
measures intended to provide a level playing field for importers
and domestic companies; the government has been rather
pro-active. We believe these measures could lead to healthy
growth of 5% in the domestic steel industry over the medium
term.
Against this backdrop, your Company will continue to make the
requisite investments needed to grow responsibly.
JSW – Enriching Lives
The JSW Foundation has pioneered various programmes
to enrich the lives of over a million people with improved
education, healthcare and sustainable means of livelihood.
Continuing on this journey, in October 2017 your Company
partnered with the Government of Uttarakhand for
reconstruction and restoration of Kedarnath which was
impacted severely during the flash floods of 2013. JSW group
is playing a proactive role in reconstruction and restoration of
the Adi Shankaracharya Kutir along with a museum, Ghats on
River Saraswati and part reconstruction of the Teerth Purohit
(Priests) houses and other infrastructural facilities related to
the houses in Kedarpuri.
Through our flagship ‘Sports Excellence Program (SEP)’, we
have been very proactive in making India a ‘sporting nation’.
This Program supports 39 athletes from of Boxing, Track &
Field, Wrestling and Tennis. We own Bengaluru FC – one of the
most successful football clubs in India in recent times.
In Conclusion
I am confident of achieving higher peaks in the future. I would
like to extend a heart-felt gratitude to each and every member
of our team for their sustained, untiring efforts in making JSW
Steel a leading steel company in the world. I would also like to
thank all our stakeholders, Board, Bankers and the Government
for the support and assistance provided throughout our
journey.
I solicit your continued cooperation.
Sincerely,
Sajjan Jindal
