Red Zone Round The Bend For Ferro Alloy Producers

Ferro Alloy Corporation Ltd, the most well known producer exporter of ferro chrome charge chrome for the year-ending March 1997 has suffered a massive loss of Rs 49.62 crore.

Sales have fallen to Rs 382 crore against Rs 406 crore for the March-ending 1996 when the company had earned a profit of Rs 22.29 crore.

When the company had come into the market in March 1993 to raise capital with its Rs 10 share being sold at a premium of Rs 25 it had forecast that for the year 1996-'97 there would be sales of Rs 389 crore with a profit after tax of Rs 4.94 crore and a cash profit of Rs 20.66 crore. Its predictions, as regards sales, have come true for 1996-'97 with sales of Rs 382 crore. But instead of a profit of Rs 4.94 crore there is a loss of Rs 49.62 crore, which is a disaster. Instead of a profit of Rs 20.66 crore, there is a loss of Rs 36.88 crore.

 

The management operations of the company have been adversely affected due to steep fall in prices of its products both in the domestic and international market. Besides, there was substantial increase in input costs due to increase in prices of power, fuel and other inputs.

Whatever may be the reason for this massive loss, the future is for those who can avoid losses. GMR Vasavi Industries Ltd a smaller ferro chrome producer with two furnaces of 7 MVA and which sells its products both in the domestic and international market has for the year-ending March 1997 showed an improved turnover of Rs 60.43 crore against Rs 58.11 crore for the year-ending March 1996. Due to adverse circumstances the post tax profits has fallen to Rs 5.10 crore in 1996-'97 against Rs 8.18 crore in the previous year.

GMR Vasavi does not have captive source of chrome ore but it draws part of its power from the Andhra Pradesh Gas Corporation power plant. GMR Vasavi is now producing ferro chrome in both the furnaces and the market having improved hopes to putout better results during 1997-'98. Another unit which has successfully overcome a bad market is Nav Bharat Ferro Alloys Ltd which produces ferro chrome, manganese alloys and also ferro silicon. For the year-ending March 1997, its sales were at Rs 110.59 crore against Rs 136.60 crore for the previous year-ending March 1996. However, the company has made a profit of Rs 9.52 crore against Rs 11.53 crore the previous year. It can look forward to better days in 1997-'98 as it has commissioned a 30MW power plant in May 1997.

It has merged NavChrome with its two furnaces and is putting up two more 16.5 MVA furnaces in Orissa.

Nav Bharat will now become one of the largest producer of bulk ferro alloy producing the whole range of bulk alloy ferro chrome, ferro manganese, silico manganese's/and ferro silicon. It draws power from the Andhra Pradesh Gas Corporation as also will now depend on its own captive power plant of 30 MW which is soon likely to be expanded to 60MW. Therefore Nav Bharat will be competitive to withstand both imports as also local producers.

One of the oldest ferro producer is Jeypore Sugar Company who has two small furnaces in Orissa. This unit is now up for sale as the management finds operations uneconomic. It has entered into a conversion agreement with MOBAR of Calcutta to produce ferro chrome but the prices fell from Rs 35000 per tonne to Rs 19,000 tonnes per tonne when the unit began production. However, operations had to be suspended and now the unit is for sale. Even new units which had come up in Kerala enjoying low power tariff are running into problems.

Silical Metallurgic Ltd a ferro silicon and low carbon silico manganese producer has seen its sales fall to Rs 19 crore for the year-ending March 1997 from Rs 29 crore in 1995-96. The unit has suffered a loss of Rs 77 lakh against a profit of Rs 355 lakh the previous year.

Even a large producer of manganese alloys, Maharashtra Elektrosmelt Ltd, which is a subsidiary of SAIL with an assured offtake has suffered a loss for 1996-97. Its sales increased to Rs 180 crore from Rs 164 crore but incurred a loss of Rs 160 lakh against a profit of Rs 190 lakh last year. The losses are mostly due to high power cost but with a assured market for its product the company could have avoided a loss with prudent management. Universal Ferro and Alliede Chemicals which has a capacity of 100,000 tonnes of manganese alloys same as that of Maharashtra Elektrosmelt has been closed for more than six months due to large power dues. The fate of the unit is uncertain.

The entire Rajpur belt where there are numerous ferro alloys producers mostly producing manganese alloys are also finding the going difficult.