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Jayaswal Neco Industries Ltd.

BSE: 522285 Sector: Engineering
NSE: JAYNECOIND ISIN Code: INE854B01010
BSE 15:34 | 25 Feb 3.51 0.14
(4.15%)
OPEN

3.51

HIGH

3.51

LOW

3.51

NSE 15:40 | 25 Feb 3.40 0
(0.00%)
OPEN

3.40

HIGH

3.45

LOW

3.40

OPEN 3.51
PREVIOUS CLOSE 3.37
VOLUME 70
52-Week high 6.70
52-Week low 3.00
P/E
Mkt Cap.(Rs cr) 224
Buy Price 3.25
Buy Qty 2000.00
Sell Price 3.50
Sell Qty 199.00
OPEN 3.51
CLOSE 3.37
VOLUME 70
52-Week high 6.70
52-Week low 3.00
P/E
Mkt Cap.(Rs cr) 224
Buy Price 3.25
Buy Qty 2000.00
Sell Price 3.50
Sell Qty 199.00

Jayaswal Neco Industries Ltd. (JAYNECOIND) - Chairman Speech

Company chairman speech

JAYASWAL NECO INDUSTRIES LIMITED ANNUAL REPORT 2007-2008 CHAIRMAN'S REPORT Dear Stakeholders, The Company ended the year 2007-08 with an impressive and all time high performance, bringing almost an end to the struggle phase; the Company had to pass through in the last few years. You would be pleased to see a pleasantly different performance of your Company in the years to come as the long cherished dream of having an Integrated Steel Plant is going to be realized shortly. The Company which began its journey as a small Grey Iron Foundry in 1975, and has now grown into Rs. 1700 Crore empire. Your Company is to-day, ranked 16th in terms of total Income under 'Dun 8: Bradstreet's India's top 500 companies 2007'. It is a time to took beyond as the Company is poised to achieve greater heights and new milestones in its 37th year of existence. The Company has planned ambitious expansions and capacity augmentations. Two major projects namely, 2 x 500 TPD Sponge Iron plant with a 35 MW waste heat recovery based captive power plant at Raigarh and expansion of the capacity of Coke Oven plant from 1 Lac MT to 3 Lac MT p.a. with 18 MW captive power plant at Raipur at an estimated total capital outlay of about Rs. 800 crores are under active consideration. It gives me pleasure to communicate and share my views with you all about the industrial scenario in which your Company operates. Global Steel Scenario The year 2007 was the fourth year in succession when the global Crude steel production crossed the 1 Billion Tonnes mark, the CAGR being 8.20o during the period. Likewise, Global finished steel consumption during the year 2007, grew by 6.6% During 2007, China was at the top of the global crude steel production with 489 Million Tonnes and consumption with 408 Million Tonnes, while; India emerged as fifth with 55 Million Tonnes of production and 51 Million Tonnes of consumption. Despite being the fifth largest producer of steel in the world, the per capita consumption of steel in India is very low at around 38 kg to 40 kg compared to the world average of 200 kg. The production and demand of steel in India and abroad is expected to increase at 10% p. a. in the coming years. The steel prices all over the globe have increased steeply so also the raw material costs. Rising raw material prices in the spot market specially, of Iron ore, Pig iron, Soap and Metcoke have squeezed the margins of steel producers. Nevertheless, with global expansions and consolidations, the steel industry all over the world is most likely to see a promising growth in the days to come. Indian Economy The Indian Economy has grown at a much faster pace than anticipated in the recent years. The growth in GDP at market prices has exceeded 8 per cent during the last 5 years. The projected economic growth of 8.7 per cent for 2007-08 was fully in line with this trend. There is acceleration in domestic investment and saving rates to drive growth and provide the resources for meeting the 9 percent (average) growth target of the Eleventh Five-Year Plan. As far as Iron and Steel sector is concerned, it is apparent that the market for Steel in India has a large untapped potential in various consuming sectors for the coming years. This is evidenced by strong economy, huge planned expenditure in infrastructure, House building and automotive sectors. Rising income levels and consumer spending patterns also point towards the same. India's steel appetite is likely to match the developed countries in the years to come as it has entered the era of increasing demand and capacity addition. The estimated production of steel will go up to 125 million Tonnes by 2012. The demand for long and flat steel products is already growing at nearly 12% and it is expected to reach 13% in near future. Raw Material Challenges The joy of visualizing a bright future is not without challenges. Two most important raw materials for making steel are Iron Ore Et Coking Coal. Present situation of the lifeline of this industry is briefly as under. Iron Ore India ranks sixth in the world in terms of iron ore reserves of about 24 billion Tonnes. However, the scenario is a matter of concern as reserves are depleting faster and the availability is becoming a recurring problem notwithstanding the steadily rising prices. According to a study by National Council of Applied Economic Research, it is estimated that resources of high and medium grade iron ore may not last for more than 19 years; although there is a possibility of discovering additional resources. With constant exports of 100 Million Tonnes and growing steel industry, hematite ore reserves (at 55% cut-off grade of iron) may last for about 37 years only and magnetite reserves may last for about 44 years. It is strongly suggested that leadership of this country must foresee tong term prospects of the country and stop exports of this vital, scarce material. Instead, a proactive policy for encouraging the exports of high value steel products should be formulated and adopted to facilitate much needed faster industrialization of the domestic industries. Coking Coal For the blast furnace based steel plants, coking coal is a very critical raw material. India has only 32 Billion Tonnes of coking coal and 221 Billion Tonnes of non-coking coal reserves as on 1 January 2006. For steel production coking coal with 17% ash content (maximum) is suitable, the ash content available in ROM coking coal in India is 26-35%. Although India's coking coal production has been projected to increase from 18.8 Million Tonnes in Tenth Five Year Plan to about 26 Million Tonnes by the end of Eleventh Five Year Plan period it would be short of the projected capacity of 125 Million Tonnes in 2011-12. Good quality of coking coal is a scarce commodity in India. Consequently, for the purpose of steel production, it is imperative to utilize either 100% imported coking coal with low ash content or adopt a suitable blend of domestic and imported coal. The National Steel policy 2005 envisages that by 2019-20, about 85% of total coal requirements will have to met through imports. Infrastructure & Logistics Apart from the principal materials as above, there is a serious concern on infrastructure and logistics. Availability of railway rakes, its allotment for steel sector, the freight etc are always the issues to reckon with. The projected growth of steel sector and huge movement of raw materials and finished steel calls for massive investments in laying new tracks, strengthening existing tracks, electrification and signaling and in rotting-stock. There wit[ have to be dedicated freight trains. Freight structure needs re-examination. The share of Roadways is assumed at 40% for the overall steel industry, with 30% for raw materials, 70% for finished steel. This does not include iron ore export. To achieve the targeted level of growth in the steel industry, the road structure also has to be expanded and strengthened considerably. Currently, roads carry 70% of freight traffic on all India basis. Unless issues related to Railways & Roadways are addressed on war footing, transportation will become a bottleneck to achieve the envisaged levels of steel production by 2020. Consolidation is the buzz word today as it gives economies of scale and synergies in operation. Today we have a number of small units particularly in coal based sponge iron sector, mini blast furnace sector, induction furnace sector, EAF sector, re-rotting sector etc. It is time some consolidation takes place in these sectors so that they will be in a better position to face rising costs of inputs and become cost competitive in the Indian and Global markets. Iron and Steel Castings business India's Foundry market is growing at about 17% as against an average growth rate of 9% in the global market. For the year 2007-08, India produced 8 million tones of castings and is pushing the production level towards 11 to 12 million tones in the coming years. Production and Sales in the automotive sector in India have picked up in all the segments in the recent times. About 30% of the foundry output is consumed by the booming automobile segment alone. Most of the European Original Equipment Manufacturers are sourcing castings from low cost destinations like India and it is upto the Indian foundry industry to gainfully explore this business opportunity by focusing on becoming quality concious and cost-competitive in the markets. The automotive sector is poised for a growth of 15% on account of focus by government on roads & infrastructure, availability of consumer finance, excise duty reduction, tax sops by government and higher disposable income with the households. India is emerging as an auto hub for exports to Africa, Europe and SE Asia by global Automotive majors like GM, Toyota, Hyundai, Ford and Suzuki. The Company has in tune with market trends adopted a strategy for its automotive castings units to focus on Cylinder Heads and Axle Housings. Gradually the production of Brake drum castings would be phased out. However, the area of concern in this segment is rising cost of materials consumed in foundries serious affecting the bottom lines and dampening the spirit of expansions and growth. Large number of foundries in india are operating at low capacity utilizations and some are in the process of exiting the business. The remedy to these problems lie in improvement in infrastructure, better material movements, minimizing inventory carrying costs and other measures to give improved quality and higher productivity. The government could consider granting relief from duties on materials used by foundries and increase of DEPB benefits forcastings exporters. I am quite hopeful that the Company would perform better in the years to come. I appreciate and thank you all for the confidence posed in the management during the turbulent times. The turnaround of the Company is the result of untiring efforts of everybody in it at all levels and - needless to mention - the cooperation from all the business associates without whose support; it would not have been possible. I along with my team look forward to receive your patronage in future as well. Sincerely, BASANTLALLSHAW CHAIRMAN Nagpur 25th August, 2008.