In a year marked by slowing economic growth international trade wars and slower globalofftake your Company strengthened its fundamentals with the objective to reportmulti-year business sustainability.
The Indian economy slowed to 6.8% in 2018-19 on account of the lingering impact of GSTsubdued consumer sentiment slowing rural economy and a national liquidity crunchfollowing the NBFC crisis at the end of the first half of 2018-19.
Given this reality it is creditable that your Company reported a 7.12 percent increasein revenues to H134.44 crores while the profit after tax declined to H10.43 crores in2018-19. This reality followed a year when the ferro alloys market had been weakaffecting the viability of most players.
The Company's performance was creditable as it addressed a number of challenges.
One the political attrition between the world's largest consumer economy (UnitedStates of America) and the world's largest steel manufacturer (China) affected thedynamics of the global steel sector the company's principal downstream sector. Thisreality affected prospects of companies and countries exporting raw material to China'ssteel sector.
Two ferro alloys realisations declined more than 30% from the peak affecting theindustry's performance.
Three the import of lower cost alternatives affected domestic demand andrealisations.
Four the automobile sector one of the largest steel consumers slowed during theyear with offtake declining virtually month-on-month in what is seen as one of the mostsignificant sectoral declines seen in a decade.
Five a pressure on the Indian stainless steel semi-products segment (fillet andsponge) compelled some players to discontinue operations.
Six a subdued growth of the real estate segment following RERA implementation anddemonetization impacted the demand for long steel products like TMT and structural.
Strengthening our core
Against a backdrop of these economic and sectoral realities your Company strengthenedits business model.
Your Company produced 15219 metric tonnes of ferro silicon during the year underreview compared to 14169 metric tonnes during FY 201718.
Your Company optimized costs and strengthened processes. During the year under reviewthere was an increment in the power cost that has been reflected in the increased costs.The Company has thus entered into long term power purchase agreements from FY2019-20 whichshall help in stabilising the costs.
Your Company is attractively placed to capitalize on India's long-term growth prospectsthrough prudent vertical selection knowledge competence best-in-class assetsgovernance and adequate manufacturing capacity.
Global crude steel production reached 1808.6 million tonnes in 2018 up 4.6% comparedto 2017. Asia produced 1271.1 million tonnes of crude steel in 2018 an increase of 5.6%over 2017. China's crude steel production in 2018 reached 928.3 million tonnes up 6.6%over 2017. China's share of global crude steel production increased from 50.3% in 2017 to51.3% in 2018.
India's crude steel production for 2018 was 106.5 million tonnes up 4.9% on 2017.India replaced Japan as the world's second-largest steel- producing country whileretaining its position as the third-largest finished steel consumer. India also emerged asthe largest producer of sponge iron across the world.
India possessed an installed capacity of 132 million tonnes in 2018 whereas productionfor the period was 106.5 million tonnes compared to 101.5 million tonnes in 2017 a y-o-y4.9% growth. India's per capita steel consumption rose from 59 kilograms in 2014 to 69kilograms in 2018 which was still below the global average of ~214 kilograms.
India emerged as the fastest-growing major stainless steel market in the world. The percapita consumption of stainless steel in India is a mere 2 kilograms compared to theglobal average of ~6 kilograms indicating large headroom. In 2018 India's totalstainless steel production was pegged at ~3.6 million tonnes for long and flat products.
India's steel demand is estimated to grow 7.3% in 2019 riding robust GDP growth.Despite burgeoning demand steel production is projected to grow 2.5-3%. Domesticsteelmakers are expected to increase their capacity by ~16 million tonnes between FY2019and FY2021. This capacity ramp- up and debottlenecking of stressed assets would warrantindustry-wide capex of ~H750-800 billion between FY2018-19 and FY2020-21.
Looking ahead the steel industry is expected to achieve 300 million tonnes ofproduction capacity by 2030. Increased outlays for the railways sector affordable housingpush and rising demand in capital goods and consumer durables could strengthen thedomestic steel industry.
India is the world's fourth-largest automobile industry and the world's seventh-largestcommercial vehicle manufacturer. The Indian automobile industry which accounts for a ~7%share of the country's GDP is at the cusp of a transformation. The sector has seen glutin FY 2018-19 because of policies like the ban on diesel vehicles on specific pocketsthrust on electric vehicles graduation to BS-VI standards and shared mobility eachaffecting demand and consumer sentiment. However India is expected to be the world'sthird-largest car market by 2020 with more than 4 million units being sold annually. Aprojected improvement in banking liquidity government infrastructure spending and risingincomes provide an optimistic sectoral environment.
What provides optimism in this challenging scenario is our longterm goodwill withcustomers and trade partners on account of superior product quality.
The demand for steel is expected to rise as the real estate sector and automobilesector stabalises. The political stability in the country and continued infrastructuredevelopment could strengthen steel and ferro alloys demand.
At Shyam Century Ferrous Limited our retrospective industry disappointment hastransformed to guarded optimism where we believe that we will continue to leverage ourpassion to excel and outperform.
Shyam Century Ferrous Limited