Essar Steel Registers 283% Growth in Operating Profits at Rs. 203.67 cr. and 80% Growth in Total Income at Rs. 841.53 cr. for the Quarter Ended December 31, 2002
January 30, 2003
Financial Performance
Essar Steel recorded a growth of 283% in its operating profits and 80% in its total income for the quarter ended 31 December 2002 over the previous corresponding quarter of 31 December 2001.
The company registered an operating profit of Rs 203.67 crore (Rs 53.18 crore in the corresponding quarter of previous year) and a total income of Rs 841.53 crore (Rs 468.05 crore in the previous corresponding quarter). After providing for increased finance costs of Rs 166.74 crore (Rs 150.48 crore in the previous corresponding quarter), the company recorded a healthy cash profit of Rs 36.93 crore compared to a cash loss of Rs 97.30 crore in the corresponding quarter of last year. The company reduced its losses in the quarter by 54% to Rs 65.91 crore from a loss of Rs 142.15 crore in the previous corresponding quarter.
Company's Operating Performance
The company's exports significantly increased over the previous corresponding quarter by 448% to Rs 335 crore from Rs 61 crore. The company maintained its sales in the domestic market which grew by 25% over the previous corresponding quarter.
In terms of quantity of steel sold, the sales registered a sizeable growth of 39% from 3.42 lakh tonnes in the previous corresponding quarter to 4.74 lakh tonnes in the quarter under review. The company exported 208,286 tonnes of steel compared to 55,819 tonnes in the previous corresponding quarter. The sales in the domestic market fell marginally from 286,337 tonnes in the previous corresponding quarter to 265,831 tonnes in the quarter ended 31 December 2002.
Future Outlook
The Corporate Debt Restructuring scheme has been approved with retrospective from 1 October 2002. The impact of CDR has not been taken into account for the quarter under review. On implementation, the scheme is expected to improve the company's cashflows, help restructure its balance sheet and enable it to recover from the industry recession.
Market Outlook
A major factor in improved performance of steel companies is that global steel prices returned to their normal levels at US$ 330 per tonne compared to the unusually low prices of the last two years (US$ 180 per tonne in 2001). The current price of US$ 325 - US$ 350 approximates the average price for hot rolled coils based on long-term historical trends. Further, global steel prices should remain firm, at least in the short-term, because of the growing Chinese market where consumption has grown from 53.6 million tonnes in 1990 to 141.2 million tonnes in 2000 and 182 million tonnes in 2002. Demand in China in 2003 is expected to be 190 million tonnes.
Another positive factor that will encourage global price stability over the longer-term is a world-wide appreciation among global firms about the need to control oversupply, overproduction and over-capacity. Last year, OECD member countries have determined to phase out about 140 million tonnes of unviable steel capacity by 2005.
CORPORATE