Essar Steel plans expansion, production increase at Indonesia unit

Essar Steel's Indonesia business shows 22% year-on-year EBITDA growth in FY15

PT Essar Indonesia, part of Essar Steel and the largest cold rolled producer in the country's private sector, is planning to increase production, target new demand areas, introduce value-added products and expand capacity. “Our focus is going to be on the cold rolled annealed segment, which will allow us increased presence in the automobile and white goods industries, where high demand is seen,” Dattatreya Tembhekar, chief executive officer, told Business Standard in a telephonic conversation today.  

The company, which reported 22 per cent growth, year on year, in its EBITDA — earnings before interest, taxes, depreciation and amortisation, and an indicator of profitability — in the year ended March 31, 2015, has a strong presence in the construction and infrastructure sectors.  

PT Essar Indonesia has a rolling capacity of 400,000 tonnes, including 150,000 tonnes of galvanised products and 100,000 tonnes of cold rolled soft products. In the year ended March, the company produced 317,000 tonnes of steel products, 2 per cent more than the previous year. It plans to raise production by 10 per cent this year.  

“We have plans to bring in a different value-added product this year which can help us keep a strong EBITDA,” Tembhekar said without disclosing details. The change in the product mix towards high-value grades resulted in higher EBITDA for 2014-15, the company said in its earnings press release.  

The company is also gearing up to increase its capacity in cold rolling as well as the galvanised segment in 2016-17. “We will take the cold rolling capacity to 225,000 tonnes from 200,000 tonnes. Loans have been taken for the $10 million capital expenditure. About 80 per cent of the funds will come through loans and the balance through internal accruals,” said Tembhekar.  

A 100,000 tonne galvanised unit was still on the drawing board with finances yet to be tied up, he said without disclosing how much would be needed for setting up the plant.  

Apart from Indonesia, Essar Steel has a presence in Canada, the US and West Asia. 

HIGH ON GROWTH

• PT Essar Indonesia, which reported 22% growth y-o-y in its EBITDA in the year ended March 31, 2015, has a strong presence in the construction and infrastructure sectors
• It has a rolling capacity of 400,000 tonnes, including 150,000 tonnes of galvanised products and 100,000 tonnes of cold rolled  products
• The company is also gearing up to increase its capacity in cold rolling as well as the galvanised segment in 2016-17