"To succeed we knew that talent knowledge and expertise were not enough. Weneeded something more critical - the will to win. And hence we ignited thispassion.
In business every day is a battle - for survival for growth and for sustenance. Butour fight was quite unique. For it I was not as much with the external world I as it waswith ourselves - collectively i and individually. For in 2015-16 we i suffered a loss ofRs.8 Crore our first in l 39 years. We were with our back to the wall.
I We had two options. Either continue H blaming the prevailing external environment forour doom or stand l up with a united interest - success.
To succeed we knew that talent knowledge and expertise were not enough. We neededsomething more critical - the will to win. And we ignited this passion in the hearts andminds of every HEG member. The magic of this strategy is borne out in our performance.
Our operations and marketing teams worked in tandem.
On the operation side we challenged prevailing benchmarks put in place new systemsand monitoring parameters inculcated a mindset of disciplined operations and ensured thatwe delivered on our commitment every single hour.
On the marketing side we spread wide and delved deep for expanding our opportunitymatrix. We added customers we entered new geographies and strengthened existingrelations. And as the saying goes - luck favours the brave. Our efforts were supported bya turn in the external environment. The fortunes of the global steel industry changed forthe better leading to restocking of inventories. Besides the on-going supply-siderestructuring in China's steel sector has facilitated in restarting of EAF-based steelmaking infrastructure in other parts of the globe. The combination of these factors workedin our favour - we got sizeable orders to shore our capacity utilization.
Interestingly focused marketing intelligent planning and disciplined operationsresulted in saving precious working capital which we prudently used to retire externaldebts. The bottomline then is that we made the organization fitter with a leanerman-force; we made business model more solid even as we made the organization increasinglyliquid.
The bottomline then is that we made the organization fitter with a leaner man-force; wemade business model more solid even as we made the organization increasingly liquid.
Even as we cheer towards our success in one bout we feel the fight has only begun fornow the challenge lies in sustaining our performance against all odds. So while theprospects seem bright the journey abounds with challenges.
Promising prospects: After registering a 0.8% growth in 2016 the global steelsector is expected to grow by 0.5% in 2017 even as weakness in investment globallycontinues to hold back a stronger steel demand recovery (Source: World Steel Association).While the prospects at macro level do not appear very promising a deeper analysis at themicro level reveals interesting opportunities.
China the largest steel producer in the globe has launched the supply-side reforms tophase out lesser efficient steel mills - a target of permanently shutting 150 million MTcapacity by 2020. While a total of 85 million tonnes of annual capacity was shut in 2016exceeding a national target the nation aims to shut another 45 million tonnes of annualsteel capacity in 2017. This capacity closure has significant ramifications.
* One demand is expected to outweigh supply for the first time in 5 years which means1) price stability in the global marketplace and 2) China participation in global tradewill reduce considerably a huge relief for steelmakers across the globe who have been hitby cheap Chinese shipments. This is evidenced by a significant fall in China's steelexports in 2016.
* Two China's steel manufacturing capacity is primarily through the blast furnaceroute. Capacity closure in China would result in the revival of capacities in other partsof the globe especially in the Middle-East (leveraging the EAF technology) which wereseverely impacted by steel dumping from China.
With EAF capacities expected to come online in the near term the demand for graphiteelectrodes is expected to increase over the coming years. And with about 200000 MT ofgraphite electrode capacity across the globe permanently shut over the last three yearsthe prospects for the existing players is expected to be promising.
Even while the demand is set to increase the input prices for graphite electrodes hasskyrocketed by more than 100% over the previous year average. This unprecedented risecould exert significant pressure on business margins during the current year.
Despite the mixed bag I remain optimistic about the Company's performance in thecurrent year. The positives promise to shore our order book and consequently our capacityutilization. In addition we will continue to strengthen the man-machine efficiency at ouroperating units which should facilitate in minimizing the impact of inflationarypressures. In addition our efforts in optimizing our interest liability should also makean important contribution to the Company's bottomline - enabling us to strengthenshareholder value over the coming years.
Message to shareholders
As we see optimism on the horizon we are readying ourselves for a strongerperformance. We remain confident of our success tomorrow and in the years to come.
A fellow shareholder and Chairman