I take this privilege to present you the 44th Annual Report and share my thoughts andinsights on your Company's progress during the year.
Stagnant global trade subdued investment geo-political and heightened policyuncertainty marked another difficult year for the world economy. It was coupled with majorevents like US Presidential elections and Brexit. China's investment did pick up in thepast year but tightening of housing policy and potentially slow manufacturing capexgrowth are important constraints going forward.
Amidst these uncertainties I am very much bullish on India's prospects. Our countryhas emerged as one of the fastest growing economies in recent times. It has achieved thehighest growth rate amongst the G-20 nations. Demonetisation had a temporary effect on thegrowth. The economy is expected to flourish further in 2018 owing to favourable economicconditions expected to prevail during the year as well as few other economic factors like:
Increased Government spending on infrastructure
Reduction in interest rates
Implementation of GST one nation one tax
Expected surge in consumer spending
Growth in the affordable housing segment
Among all major steel producing countries India emerged as sweet spot. Steelproduction reported a growth of 8.50% in 2016-17 with a production of 97.40 MnT. Thedomestic consumption was lower owing to poor offtake from the end-use segments likeconstruction
automobiles and white goods sectors. The Government has proposed over 3.96 lakh croreinvestments in the infrastructure sector for the current fiscal which will result insubstantial increase in steel consumption going forward (Source: Financial Express April11).
The Union Cabinet has approved the National Steel Policy 2017 which aims to create atechnologically advanced and globally competitive Indian steel industry. The policyaspires to achieve 300 million tonne (MT) of steel-making capacity translating intoadditional investment of ' 10 lakh crore by 2030-31. The policy further envisages todomestically meet the entire demand for high grade automotive steel electrical steelspecial steels and alloys for strategic applications. It further aims to increase domesticavailability of washed coking coal and reduce imports from about 85% to around 65% by2030-31. Furthermore it aims to increase per capita consumption of steel from current 61kg to 160 kg by 2030-31. The policy is expected to result in a reduction in imports andincreased offtake of steel from domestic steel players auguring well for the sector.
With effective policy measures restricting the flow of steel imports in the domesticmarket demand supply dynamics have become the key determinant of pricing in the domesticmarket. While domestic demand has remained weak over the past four years I believe thatrevival in government capex should support an improving demand outlook providing furthersupport to domestic steel pricing. The GST council fixed the tax rate on coal and iron oreat 5% which will further benefit the industry going forward.
A company's long-term success depends on how it progresses through the stages ofindustry consolidation. At SEML we have cautiously and selectively adapted our strategiesto ensure growth stability and consistent value creation. We have successfullyconsolidated our operations and are now working towards exploring newer growth horizons.We continued to periodically expand over the year through SPVs without raising equity.This was the outcome of our fiscal prudence and efficient debt- management.
During the year we reported a turnover of ' 1147crore and net profits of ' 131 crore.We survived the severest of economic shocks and emerged amongst the profitable steelcompanies with operating and post-tax profit margins of 14% and 11% respectively.
There were several notable achievements during the year:
Resumed operations in our iron ore mines
Achieved highest ever production of pellet sponge iron Wire Rod and HB wire
Installed a new turbine which will effectively improve the efficiency by 12%
Started power generation at 24 MW hydro power project at GulluSHP in JashpurDistrict
Issued Commercial Paper for the first time
Over the years we have substantially reduced our borrowing costs through prudent fundmanagement and repayment of debts. This has strengthened our positioning for any futureexpansion. We will seek such opportunities by way of acquisition brownfield or greenfieldapproach. With the continued support of the government the future of hydro sector looksbright and progressive. Our investments in this segment will be very fruitful in the yearsto come.
I would like to thank the shareholders customers vendors investors bankers and allthe stakeholders for their continued faith in our abilities. A special thanks to themembers of the Board all our employees and the key management personal for culminatingthe culture of trust and mutual growth. Your company will continue to evolve and explorenewer and sustainable growth opportunities.
Kamal Kishore Sarda