ANNUAL REPORT 1999-2000
NATIONAL ALUMINIUM COMPANY LIMITED
It gives me great pleasure to welcome you to the 19th Annual General
Meeting of the Company. The notice convening the meeting, the Directors'
Report and the Audited Accounts for the year 1999-2000 have been with you
for some time now, and with your permission, I take them as read.
Before I take up the agenda for today's meeting, I would like to share with
you some of my thoughts on the general economic scenario, the aluminium
industry and the performance of your Company.
The performance of the Indian economy in 1999-2000 has been encouraging
despite a slight fall in GDP, attributed to the negative growth in
agricultural production. A surge has been experienced in the industrial
production indexed at 8.1 per cent, compared to 3 .8 per cent of the
previous year. Corporate sector sales have registered an increase of 22.9
per cent. Exports overcame the negative trend of 1998-99 to touch a growth
rate of 13.3 per cent, with increases taking place in the export of
manufactured goods. Foreign exchange reserves of the country increased from
29,522 million dollars to 35,058 million dollars. On several other
parameters, such as reduction in gross fiscal deficit, energy production
and foreign capital inflow, the economy has demonstrated healthy trends.
There was no direct benefit for the aluminium industry in the budget
proposals of 2000-2001. On the other hand, export income has been brought
under the tax net. However, a welcome feature of the Finance Bill has been
the further simplification of the tax administration. I am sanguine with
the hope that the overall growth in the economy, being consistently pursued
by the Government, will boost the aluminium industry in many ways.
The Aluminium Industry
In the face of many changes and challenges, Indian aluminium industry has
remained remarkably resilient over the years. Aluminium was among the first
few commodities, whose import was liberalized under the economic reforms.
The industry has not only adjusted itself to global competition on the home
grounds but also taken to exports in a big way. It is also significant that
the industry while maintaining its economic viability, against substantial
increases in the cost of labour and other major raw materials, has been
able to make large-scale investments on modemization, expansions and
captive generation of power. This goes to prove the inherent strength of
the Indian aluminium industry to remain globally ,competitive.
Emerging from the regulatory regime, the aluminium industry is now well
poised for expansion and growth, keeping in view the export opportunities
and the cost competitiveness of Indian producers. It is a matter of pride
that your Company is leading the Indian aluminium industry in exports.
The large reserve of about 3000 million tonnes of bauxite, I am sure, will
help India to achieve a coveted role in the international aluminium market
in the new millennium. Taking into account the on-going programmes of
expansion, the smelting capacity of the country will increase from 7,14,000
tonnes to 9,29,000 tonnes per annum in the next 2 to 3 years time. The
share of your Company in the expanded capacity will be more than 40 per
cent. On alumina front, your Company is about to complete the doubling of
its 8,00,000 tpa Refinery. This will go a long way to consolidate the
position of your Company in the world alumina trade, ahead of the
greenfield alumina projects planned on east coast bauxite deposits.
The current intenational market scenario is encouraging for the industry.
The growth environment of the industrialized countries, the recovery of the
East Asian economy and closure of some of the high cost Western smelters,
are some of the factors keeping the aluminium market buoyant. This trend is
expected to continue for a couple of years with LME prices projected in the
range of l500 to 1600 US dollars per tonne. The domestic demand, which was
5,35,700 tonnes during 1999-2000, is also expected to remain favourable. In
view of the recessionary trends in the economy getting gradually outpaced,
aluminium consumption IS slated to witness a growth of 7 to 8 per cent per
The pattern of aluminium consumption is undergoing significant changes.
Aluminium demand. which has been closely related to developments in
electrical sector, is expected to get more shares in construction,
transport and packaging sectors. These are good signs. I must say, the
outlook of the industry is quite upbeat.
Coming our of the Smelter Plant crisis of 1998-99, your Company. could
achieve remarkable improvements in production, marketing, income and profit
for the year 1999-2000. The sales turnover of Rs.2142.32 crore is a record,
with the highest ever export income of Rs. 1031.64 crore. Matching with the
sales turnover, your Company achieved the highest ever gross profit of Rs.
1000.65 crore, which after payment of corporate income tax translates into
a net profit of Rs.511.53 crore. As you may have noted from the audited
accounts presented to you, the Company has improved its performances on all
financial parameters, enhancing the book value per share of Rs.10.00 from
Rs.44.01 as on 31 March, 1999 to Rs.49.67 as on 31 March, 2000. The Company
has proposed a record dividend of 20 per cent, while meeting the entire
capital expenditure of Rs.777.43 crore of the on-going expansion projects
out of internal resources..
On the production from, the bauxite production and transportations exceeded
the rated capacity for the 6th time with a record achievement of 28,22,464
tonnes Production of calcined alumina at8,86,000 tonnes exceeded the
capacity, but fell short of an earlier record by 8,500 tonnes. In
powergeneration. the company performed better than previous two years with
a net generation of 3,985 million units.
The most significant achievement of your Company has come from the bench-
marking of the capacity utilization of the 2,30,000 tonnes
Smelter Plant. Here, for the first time, all the 480 pots were put into
operation on a sustained basis during the year. This has not only resulted
in a record output of 2,12,663 tonnes of metal but also improved the
consumption norms and quality parameters. Importantly, this achievement has
helped to renew the confidence and the commitment of the entire NALCO
Expansion and Growth
Your Company has taken rapid strides in the on-going Rs.3700 crore
expansion programme. The first phase of Alumina Refinery expansion has been
commissioned in June, 2000, which takes its capacity from 8,00,000 tonnes
to 10,50,000 tonnes per annum. The final phase of expansion to 15,75,000
tonnes will be completed by April, 2001. The Company has already doubled
the capacity of Bauxite Mines to 4 lakh tonnes, to meet the higher demand
for ore. With the large-scale expansion of the Alumina Refinery, your
Company is all set to become a key player in the international market, with
nearly a million tonnes of alumina as exportable surplus. To manage larger
volumes of exports, the Company's Port Facilities at Visakhapatnam have
undergone modifications and additions at a capital cost of about Rs.29
crore. The Mines and Refinery expansion, which envisages a capital cost of
Rs.1,664.60 crore has been internally funded so far. The total financial
commitments made so far being about Rs.1,280 crore, it is expected that the
Company will achieve substantial savings on this brownfield expansion. The
lowered cost of expansion and internal funding of the capital cost will
result in lower production cost of alumina, which has been the hallmark of
your Company, in the field of alumina production in the world.
The expansion work at the Smelter and Captive Power Plant is also going on
in full swing. While the Smelter capacity is being expanded from 2,30,000
tonnes to 3,45,000 tonnes per annum, the CPP capacity is now scheduled for
960 mw (8 units of 120 mw each) as against the earlier plan for 840 mw (7
units of 120 mw each). Although the basic technologies remain unchanged
both at Smelter and CPP, many on -line improvements are being included.
Acquisition of IAPL
As a strategic initiative, your Company has fully taken over International
Aluminium Products Ltd. (IAPL). This 50,000 tonns cold rolled products
project, adjacent to the Smelter Plant, will have the unique advantage of
direct supply of hot metal, saving on energy and transportation. The soft
credit tie-up with EFFIBANCA of Italy to the extent of about Rs.150 crore
arranged by FATA Hunter against the supply of plants and machineries will
be continued in favour of your Company. The funding pattern of IAPL wi,ll
provide advantages to the Company and its shareholders. The project
activities have been geared up for completion in stages, starting from
Envisioning the Future
In the fast changing business environment of the 21 st century, your
Company is deeply concerned about the long-term strategies, which it needs
to adopt for survival and growth. In recent months, there have been several
brainstorming sessions among the executives at various levels to generate
ideas on the future course of business. The consensus seems to be in favour
of pursuing a future, based on the core competence of the Company, that is,
manufacturing alumina and primary aluminium. The future plans of creating
downstream or upstream facilities, further expansion of basic capacities,
collaborations, joint ventures, research and development activities should
be in consonance with the core strengths and should create the synergy
required for success. Your management is in the process of formulating a
broad plan for the future, which should hold good for the
next 10 to 20 years.
I must admit that the performance of your Company is highly sensitive to
its human resources. Technology, quality, quantity and cost are sustained
through the collective endeavour of the people who work for the Company. In
charting a future, be it long term or short term, a great deal of
confidence is reposed on the willingness and ability of the people to
learn, adopt and adjust to the dynamic environment of the future. I
believe, your Company has the right kind of people to nurture the growth
and prosperity of the oranization.
On behalf of the Company and all of you, I take this opportunity to thank
our valued customers, suppliers, bankers, consultants, the Members of the
Board, the Government of India, the Government of Orissa and in particular
the Nalco Collective for their excellent support and co-operation to
achieve yet another year of success for the Company.
Bhubaneswar P. Psrvsthisen
Septelnber 30, 2000 Chairman