Consolidated financials: Revenue from operations for the year increased by 29.83% to Rs. 2588.84 Crore as compared to Rs. 1994.08 Crore during the previous financial year; EBITDA for the year increased by 97.85% to Rs. 605.56 Crores as compared to EBITDA of Rs. 306.07 crores achieved during previous financial year; Profit after tax during the year increased to Rs. 214.69 Crores as compared to net loss after tax of Rs. 73.62 Crore during last financial year.
The domestic iron & steel which was on path of recovery post demonetization on account of improvement in global growth outlook and supply constrained due to various measures taken by Chinese Government like phasing out of high polluting steel plants etc., which took further momentum due decisive action by the Chinese State Government on environmental curb, the finished steel prices saw further improvement in demand for steel products resulting into recovery in steel prices. The domestic steel demand also improved on account various measures taken by Government of India during past couple of years towards infrastructure development, low cost housing, railways etc. and consumption led growth in demand from automobiles sectors etc. which is evident from higher production volume and consumption growth.
Further with improvement in consumption led demand, finished steel prices also improved during the last 4 months of the year under review to pre-2013-14 years resulting into further improvement in steel industry’s financial performance in general and your Company’s performance in particular leading to increase in net sales by 38% and EBIDTA 149% which was highest ever in the history of the Company.
The net debt on consolidated basis stood at Rs. 2007 Crores at the end of the year as compared to Rs. 2175 crores at the end of previous year, a reduction of ` 168 crores.
Global steel demand grew at 4.8% on-year in 2017 largely driven by robust growth in the key steel producing countries. China witnessed strong demand growth at 8.3% on-year, followed by the US at 6.4%, Japan and EU at 3.5% and 3.1% on-year respectively. Demand from India grew at 4.4% on-year in 2017 as per WSA. However, steel demand from the rest of the world logged a marginal decline of 0.8% on year. In 2017 China eliminated its out dated induction furnaces which was generally not captured in official published statistics. The demand being catered by these closed units shifted to mainstream steel makers and therefore added to an incremental demand of 5.3% over the nominal base growth in 3%. Consequently, the steel demand growth in China increased to 8.3%.
Going ahead we expect steel demand to benefit from favourable global economic momentum especially in advanced economies, however, faces risks from rising global trade tensions. Higher than expected GDP growth shall result in 2 to 2.5% growth in steel demand from US and EU. China’s demand growth is expected to moderate to 2-3% on-year owing to slacking construction industry and declining auto production. However, India to be an outlier with strong expected growth of ~6% on-year led by robust growth in infrastructure and construction segment coupled with healthy automobile production growth.
The iron ore mining increased during the year under review by 34.43 % consequent upon ramp up of production volumes in Ari-dongri and Boria Tibu mines. The higher production from captive mines resulted into better operating margins as compared to last year on account of saving.
Your Company has achieved a capacity utilization of 88% in FY 2017-18 as compared to 71% in FY 2016-17. The production of iron ore pellets increased during the year by 23.14%. The higher production of iron ore pellets coupled with better realizations contributed to the top line and bottom line to a great extent.
The Company operated the sponge iron plant at full capacity and achieved the production volumes of 439139 MT, mainly on account of operational efficiency. During year the plant operated at 89% capacity utilization due to higher number of days of operation.
The production of Steel Billets reduced marginally by 3.22% on yoy basis. The production of steel billets and lower capacity utilization is on account of availability of lower power from captive sources. The utilization level in the steel billets division is expected to improve in the coming years as the Company has undertaken the modernization cum balancing plan in SMS and also on account of availability of power from the company’s associate Jagdamba Power and Alloys Limited (JPAL), for which necessary approvals have been received. The power from JPAL is expected to be available in couple of weeks, which will lead to between improvement in capacity utilisation of Steel Melting Shop.
The Company is making silico manganese, used in steel making. The production of ferro alloys increased marginally by 4.84% yoy. The demand for ferro alloys has also improved over a period of last one year leading to improved demand scenario.
The Company is operating 73 MW of captive power generation capacity out of which 42MW is waste heat recovery, 11 MW thermal coal based and 20 MW bio mass power. The overall production volumes increased marginally by 4.77% as compared to previous year. The Company has also tied up additional power capacity of 25 MW with Jagdamba Power & Alloys Ltd
The raw material and input cost of Company during the year was 59.84% of net sales as compared to 68.69% during the previous year. The overall cost reduced on account of improved utilization in captive iron ore mines, leading in reduction in input cost. Further your Company during the year secured long term coal linkages (5 years) from Coal India Ltd. in the recently concluded auction of coal linkages as per policy framed by Government of India and Coal India Ltd. The coal under linkages supply is cheaper as compared to market price of coal. Although due to rack availability issue the supply of linkage coal is delayed, however situation is improving gradually and your Company is expected to get full benefit of linkage coal over a period of next 2 years, The Company is in the process of ramping of the iron mining output to its approved capacity of 2 million tons which is also expected to help reduce the input cost going forward leading to improved margin and protect the business of the Company from down turn in iron & steel demand. Your Company has secured major portion of input requirement through captive mines and coal linkages.
The overall value of inventory of raw materials including stock in transit increased to Rs. 229.64 crore as on March 31, 2018 as compared to Rs. 105.16 crore as on March 31, 2017. The average level of holding of raw material stood at 66 days of consumption as compared to a level of 36 days during the previous year. Raw Material inventory kept at increased level in view of the increasing trend in the prices.