I am delighted and privileged to apprise you about the encouraging performance of yourCompany during the Financial Year 2018-19. Amidst continued challenging businessenvironment initiatives taken have resulted in enhancing Profitability reinforcing ourleadership in Pellet making industry.
I on behalf of the Board of Directors as well as dedicated employees of KIOCL presentto you the Company's Annual Report for the Financial Year 2018-19.
Key Performance Highlights
Let me share the key performance highlights for the FY 2018-19. Your Company has: -
- Surpassed "Excellent" Target in Production and Dispatches by producing 2.24Million Tons and dispatching 2.21 Million Tons of Pellet respectively.
- Achieved Export Sales of 1.52 Million Tons of Pellets highest after closure ofCaptive Mines at Kudremukh.
- Achieved Revenue from Operations Rs. 1887.71 crores shot up by 15% highest sinceinception.
- Achieved record Turnover of Rs. 2013 crores which is highest since inception asagainst Rs. 1784 crores in the Financial Year 2017-18 registering growth of 13%.
- Earned an Operating Profit of Rs. 67.20 crores during the year after a gap of sixyears since the Financial Years 2011-12.
- Earned a Profit Before Tax of Rs. 184.12 crores compared to Rs. 86.09 crores in theyear before registering an increase of 114%. Net Profit (PAT) stood at Rs. 111.86 crorescompared to Rs. 81.48 crores in Financial Year 2017-18 up by 37%.
- Concluded Buy-back of 12588235 equity shares representing 1.98% of the Paid-upEquity Share Capital with total outgo of Rs. 214 crores.
- Proposed to pay a total dividend of Rs. 99 crores for the year 2018-19 which is13.33% on the paid up share capital post buy-back of equity shares which would be thehighest dividend paid since Financial Year 2005-06 subject to the approval ofshareholders.
- Your Company is spreading its footprint globally by successfully supplying pellets tosteel mills in South Korea Japan Europe Middle East etc.
The Company had also entered into UK market to realize one of the ve challenges posedby Hon'ble Prime Minister of India at CPSE conclave.
Economy & Steel Sector Scenario
India has emerged as the fastest growing major economy in the world and is expected tobe one of the top three economic powers of the World over the next 10-15 years. India'sGDP is estimated to have increased 7 per cent in 2018-19. Finished steel consumption inIndia grew at a CAGR of 5.69 per cent during FY08-FY18 to reach 90.68 Mt. Wide range ofcontinuing infrastructure projects is likely to support growth in steel demand above 7% inboth 2019 and 2020. India is the world's second-largest steel producer with productionstanding at 106.5 Mt in 2018. The National Steel Policy 2017 has envisaged 300 milliontonnes of production capacity by 2030-31. India's apparent steel usage per capita fornished steel products stood at 66.2 kg way below the world's average of 212.3 kg in 2017which suggests that India has a huge unrealized potential for steel demand growth. Globalsteel demand in 2018 was increased by 2.1% and Worldsteel forecasts that the same willreach 1735 Mt in 2019 an increase of 1.3% over 2018. In 2019 demand growth is expectedin a less favorable economic environment. China's deceleration a slowing global economyuncertainty surrounding trade policies and the political situation in many regions suggesta possible moderation in business con dence and investment.
In 2018 steel consumption of the country is expected to grow 5.7 per cent year-on-yearto 92.1 Mt. and steel demand is increasing every consecutive year and it is beingforecasted by Worldsteel that it will overtake the United States in steel demand in 2019.The demand will be supported by improving investment and infrastructure programmes.
India's iron ore output is expected to have touched around 204 Mt in FY19 against 201Mt in previous scal. Iron ore supplies from some of the mines from Minas Gerais State inBrazil is expected to be affected following breach of a tailing dam belonging to majorminer Vale and subsequent mining restrictions and environmental concerns. This may alsoaffect pellet production by Vale. The expected supply shortage is likely to support globaliron ore and pellet market in 2019.
Your Company's exports have been predominantly to China as China consumes nearly 50% ofiron ore produced in the World. Volatility in Chinese Iron and steel markets affects itsperformance. The Company has been making consistent efforts to expand its market base toreduce the risk of overdependence on single market.
As a result of these efforts your Company exported pellets to Steel Mills in UKJapan South Korea Oman etc. About 48% of exports made during FY 2018-19 were to marketsother than China. UK alone contributing for 17% of total exports
Creating KIOCL of Tomorrow
Your Company is moving to the next level of sustained performance by converting theemerging opportunities into potential success stories. Your Company is a debt free Companywith surplus funds that can be invested for its growth. Therefore your Company hasembarked on a transformational journey by large size capital investments to the tune ofRs. 3500 crores.
In this regard the Company has identi ed following road map and vision: -
- Setting up of 1.79 LTPA Coke Oven Plant and 2.0 LTPA Ductile Iron Spun Pipe Plantalong with Modernization of Blast Furnace Unit.
- Develop Devadari Iron Ore Block in Bellary district Karnataka with allinfrastructure by end of 2022.
- Setting up of 5 MW Solar Power Plant in Karnataka.
- Setting up of 2.0 MTPA Pellet Plant with M/s RINL at Vizag under Joint Venture.
- Modernization of Pellet Plant Unit Mangaluru.
- Mineral Exploration activities along with exploratory drilling on allocation of areasby Ministry of Mines Govt. of India and Govt of Karnataka.
Apart from the above your Company has entered in to a MoU with M/s SAIL for exploringthe Techno-
Economic Feasibility for consideration of setting up of a Pellet Plant of suitablecapacity at the premises of SAIL's Bokaro Steel Plant (BSP) or at any other suitablelocation across SAIL's Integrated Steel Plant.
Awards & Recognitions
During FY'19 your Company has received following Awards & Recognitions:
1. "Best PSU Award in Value Growth Category" by "Governance Now".
2. First prize for the year 2017-18 "Rajbhasha Excellence Award".
3. "Outstanding Export Performance Award" for the year 2018-19 from"Mangaluru Customs Commissionerate".
Beyond business our CSR Initiatives have also helped the organization in making apositive impact in people's lives. At the same time it also sensitizes us to our role asan important stakeholder of the society and environment. In FY'19 your Company spent Rs.. 32.51 lakhs for its various CSR programs with target areas spanning from EducationPromotion of Sports Clean Drinking Water Health Care Contribution to Chief Minister'sRelief Fund and Development of Aspirational District.
Partners on the Journey
Aspirations in our journey cannot be achieved without acknowledging dedicated andcommitted efforts of each & every member of KIOCL family. I take this opportunity toonce again thank the Board Members and particularly distinguished Govt. Nominee Directorsand Independent Directors for providing leadership support to your Company and itsemployees. I also thank employees of your Company for contributing immensely. I would alsolike to thank and acknowledge the continued cooperation trust and support of variousGovernment / Regulatory authorities Company's valued customers suppliers vendorsinvestors bankers and shareholders.
Notwithstanding the shifts and turns in the market Shareholders belief in our growthstory and enduring association with us is what keeps us motivated to emerge stronger withevery passing year. At the successful closure of yet another financial year I express mygratitude to the Shareholders of the Company and look forward to continuing this journeyfor achieving greater heights together.
M V Subba Rao