Ladies and gentlemen, good day and welcome to the JSW Steel Q4 FY 2019 earnings conference call hosted by Axis Capital Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference, please signal an operator by pressing star, then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Kamlesh Bajaj from Axis Capital. Thank you, and over to you, sir.
Thanks, Jayant. Good evening. On behalf of Axis Capital, I welcome you all to the Q4FY19 post-earnings phone call of JSW Steel. Without much ado, I hand over the call to Pritesh Vinay, Vice President, Corporate Finance and Group Investor Relations. Over to you, Pritesh.
Thank you very much, Kamlesh. A very good evening to all the participants who dialed in. On behalf of JSW Steel, it is our pleasure to welcome you to our fourth quarter and full year fiscal 2019 results earnings call. I'm sure you have had the chance to go through our results, the press release, and the earnings presentation, which has been uploaded on the website, and the links to that have been in your inbox. We have with us today the management team of JSW Steel, represented by Mr. Seshagiri Rao, the Joint Managing Director and Group CFO, Dr. Vinod Nowal, Deputy Managing Director, Mr. Jayant Acharya, Director, Commercial, Marketing, and Strategy, and Mr. Rajeev Pai, the CFO. I'll hand over the floor to Mr. Rao for a few minutes of opening comments, and we will then start with the Q&A. Over to Mr. Rao.
Good evening. We welcome you all for the briefing of Q4 performance of FY2019. In Q4 FY2019, we have seen a bit of slowdown in the demand side, majorly caused by the liquidity situation in the domestic market. At the same time, we also have seen pressure on the prices, which started in the Q3 of last year, continuing to some extent in the Q4. Considering these headwinds, we tried to liquidate our inventories and increase our sales in the last quarter, which we have succeeded in doing. If you see our performance in the Q4, we have done our crude steel production of 4.17 million tons. With that, the yearly crude steel production achieved 16.69 million tons, which is very close to the guidance we have given to you in the beginning of the year.
The sales volumes stand-alone basis in the Q4 was 4.29 million tons, which is a growth of 2%. For the year, we achieved 15.76 million tons, again a growth of 1%. On a consolidated basis, the sales stood at 4.31 million tons for the Q4, and for the year, we achieved 15.6 million tons. Our sales volumes really picked up in the last quarter as we have liquidated our inventories and brought it down to 9.46 million tons from 13.91 million tons at the end of December 2018. Our exports have gone up in the Q4, which stood at 0.94 million tons, constituting 22% of the total volume of sales. Our retail sales also increased by 3% in the Q4. For the financial year 2019, what is interesting is our domestic sales grew by 11% when India grew around 7.5%.
Our domestic sales increase resulted in our market share improving by 50 basis points. It went up from 13.1% to 13.6%. The steel prices on a year-on-year basis fell by 2%. Quarter on quarter, it fell by 9%. Because of the disruptions which we have seen in iron ore and the coal side in the global markets, and also rupee depreciation of almost 6.5% in the last year, the overall cost of production year-on-year went up by 3%. Our EBITDA per ton on a stand-alone basis was INR 10,116. The EBITDA was INR 4,341, and the profit after tax on a stand-alone basis was INR 1,745. Our US Plate and Pipe Mill reported an EBITDA of $5.83 million per ton for Q4 and $26.09 million for FY2019. Our coal operations in the USA reported $1.39 million for Q4 and $5.44 million for the year.
Italy and Acero and Mingo Junction in the USA are still on the ramping-up stage, so they could not report positive EBITDA. JSW Coated INR 86 crore EBITDA, Salav INR 37.96 crore EBITDA, ARCL INR 114 crore EBITDA. Indian subsidiaries have done reasonably well. Taking this performance into account, our consolidated EBITDA compared to stand-alone was higher by INR 100 crore. Our consolidated EBITDA for Q4 was INR 4,440 crore, and for the year, it is INR 18,952 crore. There is a 28% growth in the financial year in EBITDA numbers. Consolidated profit after tax for the quarter was INR 1,495 crore, and for the year, INR 7,524 crore. If you compare the profit after tax of FY 2018 and FY 2019, there is a significant growth because FY 2018 numbers also include one-off item of tax benefits that accrued because of reduction in taxes in the USA.
The debt of the company, net debt of the company as of 31 March 2019, was INR 45,969 crores. Our average cost of debt has come down to 7.02%. Our debt to net worth was 1.34 times. Our debt to EBITDA was 2.43 times. There is an improvement in all these ratios, even though in absolute number, the net debt has gone up. The acceptances were INR 13.5 million revenue, INR 192 million on capital. The coke oven plant at Dolvi and the pipe conveyor at Vijayanagar and the tin plate at Vasind and the captive mines, which we started some and balance are starting in this financial year, these are all positives which will contribute for cost reduction in FY20. As far as the total capital expenditure is concerned, in the last year, cash flow basis we have spent INR 9,682 crores.
The balance capital expenditure, after netting out the expenditure incurred in FY 2018 and FY 2019, then we have committed additional CapEx of INR 5,700 crores. This CapEx spread over sustainable normal capital expenditure and the mining and the cost-saving projects and also downstream capacity expansion like color coating line and CRCA at Vasind. This program, CapEx program, entails an expenditure of INR 5,700 crores. The initial announcement of CapEx of INR 44,176 crores plus INR 5,700 crores, minus whatever CapEx we have put on hold, the net CapEx program is INR 48,715 crores spread over a period of four years starting from 2018. Out of this, net of expenditure incurred FY 2018 and FY 2019, the balance is INR 34,344 crores.
This amount, we will be spending INR 15,700 crores in FY 2020, which will be funded INR 10,000 crores by way of debt balance amount out of cash accruals of the company. Now, with this, I want to invite your attention to BF3 shutdown, which we have planned at Vijayanagar. We have been guiding that we will take the shutdown of BF3 in FY2020. We have made all the arrangements. We have spent a significant portion of INR 1,000 crore year-mark for this project. Whatever we have seen or experienced in the last few months, BF3 is operating quite well.
Because of various initiatives we have taken to ensure smooth operation of the blast furnace 3, we are confident now we can even extend the operations of the blast furnace further without taking shutdown during this financial year. If we go ahead as originally planned, this shutdown will have a 120-day requirement, and again, ramping-up capacity may take some more time. If we take the shutdown, we lose the production and the consequent EBITDA because of the shutdown.
Instead of that, if we can extend, we can take the shutdown of BF3 at appropriate time in future as and when our Dolvi expansion from 5 to 10 is complete. Keeping that in view, we deferred the BF3 shutdown during this year in our CapEx program. That is one. Number two, in the CapEx program, that earlier we announced we will expand our Dolvi capacity from 10 million ton to 10.7 million ton, 0.7 by spending INR 1,375 crore by DRI expansion and also other associated facilities. Now we have kept on hold as far as this INR 1,375 crore is concerned. That is also deducted while arriving at the net CapEx program for four years is INR 48,715 crore.
The special projects and other cost-saving projects include coil storage yard, some FGD in the power plant, and for tailings reduction in the beneficiation plant, CDQ for coke oven plant, new CTL line. These are the areas where we will be spending the new capital expenditure for reducing the cost or for improving the efficiency. I'm happy to share with you the board has recommended, considering the performance of the company in the financial year 2019, a dividend of 410%, INR 4.10 per share, subject to the approval of the shareholders.
Looking at the demand scenario and also our capacity to produce more within the capacity utilization, we have a guidance for production for FY 2020, 16.95 million ton, a growth of 1.5%. Similarly, sales volume growth on a stand-alone basis is 16 million ton, again a 1.5% growth. With this, I'll stop here. If any questions are there, we are open to clarify. Thank you.
Sure. Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask questions may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, may press star and two. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Amit Dixit from Edelweiss. Please go ahead.
Thanks for the opportunity and congratulations for a good set of numbers. I have two questions. The first one is regarding your overseas subsidiaries, that is the Italian asset and the newly acquired US asset. Can you let us know the revenue numbers also for these and the ramp-up plan that you have?
Okay. We will share with you the revenue numbers for both the subsidiaries. As far as the ramp-up plan is concerned, in the Italian Piombino facility, we are ramping up capacity in FY2020. We will reach capacity utilization in at least the rebar mill and the bar mill, 60% capacity utilization by end of this financial year. That is how we are planning the ramp-up. It will have a positive EBITDA going forward, at least starting from the second half of the financial year. Whereas Mingo Junction is concerned, it will take some time because the stabilization of the mill is taking time. We expect by end of this financial year, we will be able to become positive EBITDA in this Mingo Junction.
Okay. Great. That's helpful. The second question is with respect to iron ore sourcing strategy. Now, we know that we need quite a bit of iron ore, and going ahead, the bidding process is going to start in Odisha, particularly at the end of FY2020. We might be having our plans, of course, but the iron ore cost is bound to go up, and international cost is also high. What is our iron ore sourcing plan going ahead? What is the strategy that we have just to contain our cost?
There is one scenario which we can factor in. If that doesn't happen, what is the alternative strategy for us? One strategy is many of the mines are getting expired, and they have to be auctioned during this period, during this financial year. Every mining company will try to maximize the production, thereby they can make more money in this financial year. Iron ore supplies in this year could be more than what it was in the last year. For instance, in FY2019, the total iron ore produced was INR 220 million ton. It could be a little higher in this financial year. Availability of iron ore, I don't expect a big challenge in that regard. Only issue that is left out is that in case all the mines which are expiring on 31st March 2020, if they are not auctioned, will there be any disruption?
To answer that question, we have been very, very vigorously, not only individually as a company, through various associations represented to the government, that the auctions have to be done by removing the bottlenecks that are there, bottlenecks with regard to regulation, when it is to be auctioned, what is the process to be followed, is there any amendments to be done either to the rules or acts. All those issues today are known, and the government is quite aware of the issues. In my view, they are ready to go for auction starting from July. By 31st March 2020, there will be auctions done, and there will be a change of control of the mines, and they will also give time to the existing mining companies to lift the quantities that are lying at the mines after 31st March 2020.
Therefore, the bottlenecks are understood, and solutions are available, so auctions will happen, so there will not be any disruption, based on which we feel that there will be adequate supply of iron ore for sourcing within India itself. Over and above that, whatever mines we have got in the auction, we expect in this year we will produce INR 5 million ton. If our total requirement is INR 31 million-INR 32 million ton in this financial year, out of that, INR 5 million ton we expect to come from our captive sources.
Just to give you a number, last year we have produced INR 1.8 million ton from captive sources. We used INR 1.35 million ton. Therefore, another INR 5 million that will go up to INR 5 million ton. If new mines of category C are auctioned, then also we will try to make them operational if at all they are auctioned in this financial year. We are hopeful that they will do more. That way, iron ore strategy from that point of view is clear for us for sourcing. In case there are certain disruptions, always the option of sourcing from imported sources is available to JSW.
Okay. Thanks. Thanks for the elaborate answer. Thank you. All the best.
Thank you. The next question is from the line of Rajesh from HSBC. Please go ahead.
Yeah. Thanks for taking my question. My question is specifically on the auto segment. We are seeing rising headwinds with regards to auto demand. Auto segment has declined 22% quarter on quarter for JSW Steel. Going ahead, do you think that in FY2020 we can see significant demand contraction in auto, or do you think some recovery in the second half of FY2020?
The automotive sale, the production, actually, the inventories have been corrected in the last few months going from the last quarter to now. Channel inventories are also down. We expect that in the second half of this year, the cycle will come back. Pre-buying for BS-VI from April 2020, pre-buying will also kick in. Around the festive season and onwards, I think things will improve. The other thing is that part of the sales which was on the passenger vehicles, two-wheelers, etc., which were impacted by liquidity and uncertainty because of low sentiments, I think that after this political mandate should be behind us. Some improvements in that also we expect to see from the festive season as well. Yes, in the second half, we are expecting that automotive will pick up.
Can we assume that in the first half, the auto segment will continue to be under pressure?
We should assume that the auto sector in the first half may be in a similar kind of a pattern as it was for Q4.
Understood.
Thank you. The next question is from the line of Pinakin Parekh from JP Morgan. Please go ahead.
Yeah. Thank you very much. Two questions from my side. Assuming that there is no change in steel prices and steel cost, and given the CapEx guidance that the company has given, and given that we could have clarity on Bhushan Power, final rulings coming through, where does the company expect the INR 46,000 net debt to end up in March 2020? Should it be INR 60,000, INR 70,000, INR 50,000, assuming Bhushan Power also comes through?
Tech levels, absolute number may go up, but the ratios, we will be within the ratios which we have been guiding. Even in this year, when it went up from INR 38,000 in FY 2018 to INR 46,000 in 2019, this INR 8,000 debt has gone up. All the ratios have improved. There is a similar pattern that could be there. There could be an increase. I'm not ruling out that possibility. In case BPSL happens, steel prices and costs will remain, and the CapEx program will go on. In that scenario, I expect the debt will slightly go up, but the ratios will be still within the range.
Understood. My second question is on the US acquisition, where there was an EBITDA loss of, I believe, $27 million in the quarter. Annualizing, I mean, that's a $100 million plus number. How should we look at this asset over FY2020? What kind of, when does it break even EBITDA? When does it start contributing positive EBITDA? Will there investments be required to turn this asset into an EBITDA positive asset?
Capital expenditure side, I do not think they need a big capital expenditure for turning around because electric arc furnaces we have already commissioned. Hot Strip Mill requires some CapEx, but it is not significant. The issue today is, assuming that we will operate the plant, we bought the scrap slab at a higher price, and some production has happened, where suddenly the prices in the US dropped, as you know. That is causing inventory losses right now. If these inventories are replaced with the new scrap and new slabs at current rates, I do not think these types of losses will continue. Our plan is to improve the capacity ramp-up capacity as early as possible with replacement of the current inventory. I think then it will become positive.
Understood. Thank you very much, sir.
Thank you. The next question is from the line of Sanjay Parekh from Reliance Mutual Fund. Please go ahead.
Yeah. Thank you, sir. Sir, just wanted to know on this BPSL, as to what is the status of that in the NCLT process? Also, just a hypothetical question that we just heard that the liabilities perhaps could go up in that case because of some submission given by some potential creditors. In that case, legally, how does it go? I mean, in case we want to back out because of the liability going up, can we do that? If you can guide, that will be helping us.
In the question of backing out, we prepared and submitted a resolution plan which has been voted out, which has been voted by the lender, Co C. Any decision or any approval of the resolution plan, not in consonance with the resolution plan submitted by the company, then we have to take a call on that. For instance, if you look at Vardhman, where we submitted a resolution plan, and the approval of NCLT has come not in line with our resolution plan submission. Therefore, we went for an appeal to the NCLAT. NCLAT said, "You go ahead with the resolution plan implementation, but subject to his decision as and when hearing is complete." We did not want to go ahead with the resolution plan implementation when the decision is unknown, and it can go even against us.
We went for an appeal to the Supreme Court and got a stay on implementation until the court decision comes in. That is how we would like to deal with whatever resolution plan that has been submitted. If it is in line with that judgment, then we would like to implement and go ahead. If it is not in line with that, then we would like to evaluate that and take a call.
Thank you very much, sir.
Thank you. The next question is from the line of Indrajit Agarwal from Goldman Sachs. Please go ahead.
Hi. Thank you for the opportunity. A couple of questions. One on the note five in the BSE release, the reversal of or the realization of the grant income. So the entire INR 270 crore has been recognized in the P&L in fourth quarter. Is that understanding correct?
Yes. This is the practice which has been followed consistently. It is not that we recognized only in the last quarter. As we have earlier mentioned about the new procedure for claiming the incentive that is announced by the Maharashtra government, they have put certain conditions. Out of that, one is related party. Any sale within the related parties, you cannot get the incentive. They have now issued a revised notification permitting that. There are two more issues. One of them is electricity duty. Electricity duty is over and above the incentive.
That is what the government has extended to us. There is some drafting gray area in the revised procedure which they have announced. For that, we have got a legal opinion that claiming electricity duty exemption over and above the incentive is in line with the original sanction of incentives to the company. Therefore, we need not deviate from that policy. Whereas it is quantified by a note here, in case government says no, then the impact could be so much. We do not anticipate that type of decision. We have a very strong legal opinion saying that the basis of sanctioning the incentives cannot be reversed by subsequent change.
Sure. That's helpful. Secondly, it's more of a general outlook question. Given the current macroeconomic scenario globally in terms of trade war, weakening demand across the globe, how do you foresee the steel prices both globally and India over the, say, next 6 to 12 months?
If you look at the prices, steel prices in the month of December, Jayant, they bottomed out internationally at a level of about $480 for hot rolled coil, ex-China. The same increased to about $530 level in the month of March. We see a slight softening on that. As we speak today, the average for May has dropped by another $10.
There is some impact on the positive side because of some production cuts which have been announced by ArcelorMittal in Europe. ArcelorMittal has tried to increase the prices by EUR 30 in Europe post that production cut. Also, scrap prices have increased. Iron ore prices have increased. Therefore, we are seeing certain sections like Turkey have started announcing certain increases in that part of the world, with iron ore holding at these levels and coal also continuing to be elevated. Either of the things have to either steel prices move down or the iron ore on coal will correct. We do hope that these movements will synchronize sooner than later.
Sure. Thanks. One last question, if I may. For Bhushan Power and Steel Ltd., we were trying to rope in another financial partner. Any update on that, any kind of talks that we are in on that front?
In fact, last time also, we clarified the same point. In the case of BPSL, we have got the CCI clearance based on our submission for EOI and resolution plan to the lenders. JSW Steel submitted its own name. Therefore, it is not possible to complete the transaction, to rope in any financial investor at this stage. As and when the approval comes from the NCLT and once we decide to go ahead, we will be able to share more information about the structure and the details of funding.
Sure. Thanks for that. That answers my questions.
Thank you. The next question is from the line of Bhavin Chheda from Enam Holdings. Please go ahead.
Yeah. Good evening, sir. Congrats on a good set of numbers. A few questions. On your revised CapEx of INR 5,714 crore, which also includes mining CapEx, does this include a figure for the development of the mines which you plan to bid in future, or does this not include that number?
It does not include that number. It is existing mines plus Moitra coal mine, which will get operationalized by January 2020. This is the expenses related to that.
This is the number of the five iron ore mines and one coal mine which you already have one and you are developing, right?
Correct. Six mines.
Six mines. The early question reply, as you said, you expect the auction of iron ore mines process to begin this July?
Yes.
Okay. Which states do you think, so basically, it's Odisha, Karnataka, and maybe some mine in Chhattisgarh. Which do you think can come up early and are already ready with the process already? Because the big mines are in these two, three states only, which are merchant mines that are expiring. Which do you think is Odisha ready, Karnataka ready, or what's your outlook on it?
In Karnataka, we got six mines in C category auction. Three mines are in operations, the fourth mine is going to start next month. Another two mines will come in operation, one in July, another will in August .
The mines, whether new mines will get auctioned, which state first, if you're asking that question?
Yeah.
We expect, if the Karnataka government, assuming that it will be stable going forward, we expect Karnataka should start auction of mines earlier than Odisha. In Odisha also, I think July-August onwards, it should start because the same government got elected. They are quite aware of the issues, and they have taken a lot of steps to expedite the process of auctions. In both the states, Odisha and Karnataka, we should start in July.
Sir, one more question on this. As you said, the current production was close to INR 220 million, which is expected to increase. There is a lot of iron ore production already there. What would, according to you, be the inventory situation and your strategy? Because even if the auction is delayed and there is no visibility, is there a situation where we can create an inventory or other steel companies also can create an inventory because there is already a lot of iron ore in the country, but it is the steel companies which will not be having at their end? In the worst-case scenario, is there a possibility of booking the iron ore before the deadline, before getting any visibility on how the situation pans out post-March 20?
No. At least the mining companies are claiming that in Odisha, they have 127 million tons of iron ore stocks lying in the mines. In the state of Karnataka, they're claiming 10 million tons of iron ore stocks are lying at the mines. There is a large amount of iron ore lying at various places. Why this iron ore is not getting sold now, right now, particularly in Odisha, if I look at it, is logistics constraint. It is not possible to move the material. Even assuming there will be a disruption, there is a problem.
All this we assume. There is iron ore available in the mines which can be moved in that event. That is one comforting factor. The second point is, whether do we have to stock the iron ore, assuming that there will be a disruption, that we continue to evaluate the ongoing situation. Based on that, we will take appropriate steps to build inventory.
Okay. The last one, sir, on the US and the Italy operations, I missed out, I think, if you clarified it. Both reported quarterly losses. How should we take that going into FY 2020? When does it turn positive?
The Mingo Junction will take some time. Whereas Italy is concerned, we expect the capacity utilization will be ramped up faster to 60-61%. From third quarter onwards, we feel that Piombino should start showing a positive EBITDA. In the case of Mingo Junction, by end of this financial year, last quarter of this financial year, we will be positive in that. By the time all the ramping up will be done, second is existing expensive inventories will get exhausted. We will come back to normalcy by Q4 2020.
INR 27 million-INR 28 million EBITDA loss for the quarter in US operations, it would be around or more than that figure including the inventory loss. There was no one-off here, right?
Yes. That will be very difficult to say whether it will continue or not because we have, let us say, expensive stock. It depends upon how these prices of both input and output move. Based on that, we have to take the write-downs on the inventories, existing inventories. The point is, if it has to become positive EBITDA, it will take some time in the Mingo Junction.
Okay. Thank you, sir, and best of luck.
Yeah. Thank you. Before we take the next questions, we'd like to inform participants that in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. Should you have a follow-up question, we request you to rejoin the queue. The next question is from the line of Abhijit Mitra from ICICI Securities. Please go ahead.
Yes. Thanks for taking my question. On Bhushan Power, by what time do you expect resolution on the name? Because we have also raised almost $500 million for the upfront payment to the lenders. What can be the possible set of outcomes? Can the possible set of outcomes also be we walking away from the deal? If you can just give some more clarity on that.
I don't know who told you that we raised $500 million for Bhushan Power and Steel. We raised in our normal course this $500 million bond issue for CapEx program. As regards to your question on BPSL, we clarified that as and when the decision comes, as long as it is within our resolution plan parameters, we will go ahead with the transaction. If anything not in line or in consonance with the resolution plan, then we will take a call.
We are waiting for the order of the NCLT. Whatever concerns we have with regard to any liabilities that may come in, we have asked for specific reliefs and grants as a part of the resolution plan. That is why we would like to wait for the order to see whether those reliefs and subsidies are in line with the resolution plan. If it is not, then we will take a call at that time.
Okay. If you can give some update on Monnet Ispat and how have the operations ramped up in the quarter and whether we have reached the sort of watermark that we feel comfortable to take the assets in our books, when will that process start? Any guidance on the same?
Monnet Is pat, the DRI plant is operating at 100% capacity utilization. In the case of the Pellet Plant, it is operating at 1.8 million ton capacity. It will get ramped up further to 2 million in its capacity, and we are expanding to 2.4 million ton. Second half of the year, we will go to 2.4 million ton capacity utilization in the Pellet Plant. Whatever cost of production, we service the selling prices if we look at DRI and pellets. If we sell DRI and pellets, there will be a reasonable amount of EBITDA in Monnet Ispat. What we have done, we do not want to be an operator of DRI and pellet. We wanted to have an integrated operation. That integrated operation, we have started electric arc furnace, caster, blast furnace, and TMT mill. All these are started. It is the initial phase of stabilization.
That is why the costs are higher in integrated steel operation. Whatever EBITDA that is getting generated in the pellet and DRI, that is getting eaten up in the integrated operation. This will continue for some time. FY 2020 is the year for turning around this company. In the case of TMT, we are moving into alloy product of long products in Monnet. That will happen, hopefully, by second half of this financial year. With that, I think integrated operation will be more promising than what is today. At least six months to one year time, we have to give to ensure the integrated operation becomes profitable in the Monnet.
Okay. At least one year before we think of reaching that benchmark. That's a way of looking at it, right?
Yeah. We have indicated, in fact, two years. Actually, just 8 months have passed.
Okay t hanks that is all from my side.
Thank you. The next question is from the line of Dhruv Muchhal from Motilal Oswal Securities. Please go ahead.
Yeah. Thank you. Sir, can you on the Dolvi expansion, can you throw some light on the likely volumes for FY 2021, and how do you see the ramp-up?
We do not give the location-wise. As we mentioned, we will achieve 16.95 million ton total production. That is 260,000 tons more than what we did in the last year. That is FY 2019. A majority of this growth in production will come from Dolvi and Salem, not from Vijayanagar. Vijayanagar is more or less peaked.
Yeah. Sir, just wanted some color on the Dolvi expansion, the 5 million ton, if how the ramp-up will be.
Dolvi expansion, we will complete by 31st March 2020. We have not taken any production from expansion this year. Next year, the capacity utilization, generally, any new project when we start, it will be in the range of 70-80%. That is the rate.
Okay. Okay. Sure. Sir, secondly, in the balance sheet and other current liabilities, other financial liabilities, we see a sharp increase. Is this because of the, is this largely because of the short-term debts, current maturities of long-term debts? Hello?
Yes. There is $500 million of bonds which we raised in the year 2014 that is falling due in this financial year. That moves to current liabilities from the long-term holdings. That is why you have seen a sharp rise in that item.
Okay. Sure. Sir, if you can please just repeat the acceptances for revenue. You mentioned I just missed the amount.
Acceptances for revenue is $1,305 million.
Sure. Thanks a lot.
Thank you. The next question is from the line of Ashish Kejriwal from IDFC Securities. Please go ahead.
Thanks for the opportunity. Sir, just two quick questions on P&L. One, we have seen our power and fuel costs declining sharply from third to fourth quarter. Is it because of that grant income which we are talking about claiming electricity duty exemption?
No, no. I think I clarified that point. Duty is consistent. Duty exemption claiming is consistent with Q3 or previous years. There is a procedure that has been laid down for claiming incentive and electricity duty. That drafting, there is an issue that based on the legal opinion, we can continue the earlier process. Therefore, that is not the reason. Power cost has come down in the last quarter because the thermal coal prices have come down. That is the reason why you will find a sharp correction in the power cost.
Is it because of mix of thermal coal or normally we import thermal coal and that import prices have come down? That's what you are saying.
Yeah. We have 600 megawatts of coal-based power plant at Vijayanagar. We import thermal coal for that unit. That has an impact. Similarly, natural gas prices, that also got corrected. There is some benefit on account of gas.
Okay. Okay. Sir, secondly, from quarter-on-quarter basis, how much blended realization per ton has declined for us, and what is the current state of affairs on that?
Quarter-on-quarter, the realizations fell by 9%. Year- on- year, it fell by 2%. The outlook for future, he will explain.
No, as far as the realizations are concerned, I think our effort is to see that we keep on moving up the value chain and therefore try and de-risk our commodity products to the extent possible. If you see in this particular year, we have more material coming in from the tin plate side, which has just been commissioned last month end. We are having more value-added products coming in from our quarter plants and the startup of some of the facilities at Vijayanagar as well. We have Pickled and Oiled coming in from Vijayanagar also in this particular year.
The mix is going to be changing, and thereby, we would be achieving a better product mix and therefore a better value addition in this year. That would improve the realization somewhat. As far as the markets are concerned, I would not like to hesitate to guess at this point of time, and I think it's difficult to do that. The way it seems today, it seems to be range-bound and stable because of the iron ore prices and scrap prices going up. There could be a possibility of prices going up to some extent. We will watch the scenario and then take a view.
Because, sir, when we are seeing 9% decline, I think we have included in that because we have increased our exports. There could be, because of geographical mix, our decline in realization was sharper than what our peers have said. Is it possible to quantify what was the decline in realization on a domestic basis?
Sir, I think you're right on that part. If you see our exports in quarter three, it was very low at that point of time, and the prices had gone down sharply to $480 FOB level as far as China was concerned, just as a reference point. We had consciously reduced our exports in quarter three. Quarter three, our exports were 340,000 tons. We were at 15% level. We increased that exports in quarter four to 22% of our total sales, 940,000 tons plus. These 600,000 tons had an effect on the EBITDA margin on a blended basis. Yes, domestic also went down, but the impact of the export volume increasing and the product mix change was one of the main reasons because we liquidated a lot of inventories which had accumulated in quarter three.
Sure. Sir, lastly, on a macro level, because we are one of the producers who are aggressively doing CapEx for the next two years, despite the fact there is a fear of travel and other things in the geographical area outside India. That means we are very much sure about the domestic potential. My question is, are we still or are we aggressively pushing the government for the safeguard duties still?
Yeah. We have taken up with the government to take appropriate trade measures, both the actions taken by other countries like the U.S., Europe, Canada, Mexico, Turkey, etc. I think that we explained last time as well. That situation has been explained to them. The imports have increased. If you see in the last quarter, imports have gone up. The year it has gone up. Exports have come down. Therefore, the situation is clear to the government. I think once the new government comes back into power, we would be taking up again the issues with them, and we are hopeful that they would take appropriate steps to mitigate this.
Fair enough, sir. Thanks a lot and all the best for the future.
Thank you. The next question is from the line of Ritesh Shah from Investec Capital. Please go ahead.
Hi, sir. Thanks for the opportunity. Sir, you indicated that iron ore and coal prices are moving up and the steel prices are range-bound. Sir, how should we look at the spreads going forward given we have invested so much into downstream and cost-saving projects? If you could quote a number, basically, what is the kind of number on value addition and on cost-saving that one can expect in FY 2020 and FY 2021 respectively, considering we have nearly INR 20,000 crores committed towards downstream and cost-saving projects?
One to give you a number, what will be the cost savings or what will be the EBITDA, that is very difficult to quantify that number because there are a lot of moving parts here. What I will be able to say is that the project which we have commissioned, like coke oven plant at Dolvi, now 100% of the coke that is required by Vijayanagar will be supplied by Dolvi unit. That will reduce the cost substantially.
That is one. Number two, the pipe conveyor, which is now fully operational. Our plan is 11 million tons of iron ore will be supplied through pipe conveyor. The captive mines, which we are operating, 5 million tons in this year as against 1.8 million tons last year. That will replace the iron ore that is either imported or bought from Odisha, which is expensive relative to this. That will give us, again, cost savings. The fourth item is relating to increase in the PCI in our blast furnace.
That will give a significant savings for us in this financial year, both at Dolvi and also at Vijayanagar. On the product mix side, the tin plate, which we have commissioned at Vasind, 250,000 tons. That will give us, again, incremental realizations to us. There are several areas of this nature which will allow us to reduce the cost and also to improve the mix of realizations. One point which I would like to highlight, the actual standalone basis, the EBITDA per ton is INR 10,100. On a consolidated basis, the EBITDA was INR 10,300. This is after taking into account 22% we have done exports in the quarter. Whereas overall export trend, if you see, FY 2018, we did 3.6 million ton.
In FY 2019, we have done 2.4 million ton. Exports have fallen. The guidance is, even FY 2020, our exports may have a similar trend where it will come down over FY 2019. There will be more of geographical mix that also contributes to overall improvement in the realizations and also in the EBITDA margin. These are the areas which we can identify, but quantification of everything and giving a number is very difficult for us.
Sir, if I have to put it the other way around, knowing you, you would have definitely done the hurdle rate around this INR 20,000 crore of CapEx, what we are incurring on value addition and cost-saving projects. Sir, if you can just help us understand. Upstream, it's easier to understand to put a number against it. Specifically for this large CapEx, it actually becomes a bit difficult. If you can just help understand.
Yeah. Our hurdle rate is 15% IRR.
Okay. Sir, that starts to hit from which year of operation?
Sorry?
So 15% IRR, that is from year two of operations or from immediate commissioning of the project?
No, it is life of the project.
Okay. I'm saying factoring the utilization level, sir. Utilization level?
Yes. Utilization level, I already clarified. Generally, any new project or a blast furnace, if we start, in the first year, it will be in the range of around 70%. Then it gets ramped up.
Okay. That helps, sir. Sir, my second question is, I just missed on the GST reference. I think in the last quarter, you had indicated that there was INR 1,800 crore of line item which was there. I see the receivable number for standalone operations also, it has moved up. Is it still on the back of that, or is there anything more besides that?
No, it is further gone up. That way, the amount of incentive refunds which are to come from the government is going up. Because if you see the procedure that has been announced by various governments, now the refund of incentives will be given only once in a year. That way, we have to submit the return. There is a lot of process involved. The outstanding GST refund which we have to get, our incentive refund we have to get as of 31 March 2019 is INR 2,500 crore.
Okay. Thank you so much, sir. I joined later too.
Thank you. The next question is from the line of Raashi Chopra from Citig roup. Please go ahead.
Yes, this is Raashi. Just going back to pricing again, where are spot prices for both flat and long versus the previous quarter? That's one. Second is, how about the iron ore cost now versus what you saw in the fourth quarter?
As far as the prices are concerned, I think we gave you a flavor that prices came down to about $480. I'm giving you the numbers internationally. And moved to $530 exiting quarter four. I think at this level, as we said, the prices in the month of May have dropped by another $10. The average for May would be so far $520. This is as far as the international numbers are concerned, just to give a thought process on what would reflect in the domestic market.
As far as longs are concerned, I think, again, it did move. It went down, bottomed out in December end, and then went up. Again, there is a marginal drop in the month of May, and it has stabilized around that level as we speak today. I would like to avoid sharing numbers at this point of time because these are, again, too moving and difficult to put a number to it.
Sir, and on the iron ore cost?
Iron ore cost, again, from international side, it was $65 beginning of this year, this last financial year. That has moved up steadily as we just discussed. As far as coal is concerned, on an FOB basis, coking coal has moved up from 188 hard coking coal on an FOB Australia basis to the current levels of about $205. FOB basis, FOB Australia, not our blend.
Sure. Just one clarification on iron ore. Given that you are sourcing quite a bit domestically and the domestic prices have not moved as much, from your perspective, how significant is the move currently versus where you were in the fourth quarter?
Iron ore prices, you're right, has not moved up as far as NMDC is concerned. We are watching. Compared to the Q4, it is similar levels. I don't think there is a big reduction in iron ore.
Thank you.
Thank you. Due to time constraints, we'll be able to take one last question. We take the last question from the line of Jayant Acharya from Phillip Capital. Please go ahead.
Good evening, sir. Hello? Yeah. Good evening. Sir, I just want to understand that recently, U.S. is allowing Canada and Mexican steel imports to come into the country. Now, given that scenario, when you are talking about the turnaround of your Acero Junction , have you factored in there probably a price correction in the U.S.?
No. When we did the acquisition, we never thought or never factored that the 45% duty will continue forever. It has to go on some date. It is already factored. We wanted to operate the shipment as if the duties are not continuing. It is all factored in the scenario when we say that by end of this financial year, Acero J unction will become positive EBITDA.
Okay. Okay. Sir, secondly, I just wanted to understand coking coal consumption costs this quarter, and how do you see it's going in the next quarter?
Coking coal consumption, you're talking with respect to the.
4Q versus what are our expectations for the 1Q FY 2020?
Yeah. Our last quarter, our price went up by $5. We had indicated that it would go up to $10. It has gone up by $5. We expect in quarter one, it will remain at the level of quarter four.
Okay, sir. Sir, that's all from my side. Thank you for taking my questions.
Thank you very much. We'll take that as the last question. I would now like to hand the conference back to the management team for closing comments.
That way, we will complete the project expansion as planned by 31 March 2020. During the year, downstream projects and some cost-saving projects also will get commissioned. Let's see. Projects which we have commissioned in the last year, it started giving benefits to us, including pipe conveyor. There will be 1.5% growth in volumes and also change in the geographical mix and product mix in this year. These are the positives which will come in financial year 2020.
Only one point I would like to add at the end is that there are some press reports that the Samruddhi scheme, that is ESOP scheme announced by the company to the employees below L15 grade, that is Vice President and below, those employee scheme which we sought approval from the shareholders, there are some reports in the press that it is not in compliance with SEBI guidelines and the scheme is not transparent. There are two observations we have got queries. We tried to clarify, but it has not come in the press. I would like to bring to your kind attention that this ESOP scheme which we have announced is to ensure that the benefit of the value creation in the company will be shared by all the employees. Earlier, the scheme was operating only the senior management grade.
Now, we have extended to everybody in the organization, even below L15 grade. It is, again, as per SEBI guidelines, any buying of shares under ESOP through secondary market, it has to be administered through trust. We followed that guideline. At the same time, we arranged the loans for the employees to buy in their name, the shares, with a lock-in of two years. Our company will subsidize 75% of the interest payable by the employee to the lending agency. At the end of two years, he has every right to go ahead and sell the shares or retain the shares.
This is briefly the scheme which was clearly explained in our communication to the employees in the explanatory statement. Based on certain reports, the press has picked up that and reported that it is not in compliance with SEBI guidelines and it lacks full information. I wanted to clarify that it is fully compliant with the SEBI guidelines, and we have transparently disclosed all the details in our explanatory statement. If any one of you wants any further details, our investor relation department is open to clarify further on this issue. Thank you.
Thank you very much. On behalf of Axis Capital, that concludes the conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.