Essar Steel bounced back from a Rs 47 crore loss in the first half of 1996-97 to post a full years profit of Rs 9.62 crore. However, the final figure is still 92 per cent lower than last years figure of Rs 128.29 crore.
The companys year-on-year turnover jumped 200 per cent to Rs 1,802.80 crore, while other income rose more than 400 per cent to Rs 39.15 crore. Although operating profit rose to Rs 544.34 crore from Rs 175.79 crore, high interest and depreciation costs affected the net profit.
Essars interest burden increased from Rs 2.3 crore last year to Rs 285.71 crore, while depreciation rose to Rs 248.12 crore from Rs 45.21 crore. Expenditure was reined in at Rs 1,207.07 crore, up 68 per cent from the first-half figure of Rs 718.49. Addressing a press conference in Mumbai yesterday, newly appointed Essar Steel managing director J R Mehra said the company had concentrated on cost reduction in the second half of the year to offset a poor steel market and low prices.
Capacity utilisation improved during the year and touched 65 per cent for the whole year, while it touched 90 per cent in March. Total hot rolled coil production from the two-million tpa facility at Hazira (Gujarat) rose 92 per cent to 1.3 million tonnes, while sales rose 138 per cent to 1.34 million tonnes. The company has a 22 per cent HRC market share in the country. The steel market was in recession throughout 1996-97 and prices, especially those of HRC, were under severe pressure. Leading steel majors like Tata Steel and Steel Authority of India performed badly during the year with profits falling. Mehra said they were able to over-ride the slow growth by focusing on value-added products.
The combination of higher volumes, focus on value-added products and cost-cutting led to better performance in the full year, said Mehra.
Overall, Essars performance has been good. When any new plant stabilises and production ramps up, certain techno-economic parameters get better. The consumption norms improve and costs come down. Thats what has happened in Essar, said Prabhat Awasthi, steel analyst at SSKI Securities.
Essar expects a better performance in 1997-98, with improved volumes and better prices.
Buoyed by the rise in global HRC prices from $280 per tonne earlier in the year to $350 per tonne, Essar has announced an increase in domestic price of over Rs 1,000 per tonne from July 1.
Disclosing the companys performance for the first two months of 1997-98, Mehra said Essar expects to post turnover of more than Rs 500 crore. Sales have touched 375,000 tonnes, a 47 per cent jump over the corresponding period for the previous year, while monthly collections have been between Rs 250-260 crore, he added.
