Market
environment remained extremely difficult and the
global steel oversupply continued to have devastating
impact on the performance of the domestic steel
industry. As per the Industry forecast, the domestic
supply situation worsened during the quarter. While
the production levels remained unaltered vis-à-vis
corresponding period last year, the liquidation
of finished goods stocks by the steel producers
to the extent of 151% vis-à-vis first quarter
in this financial year has upset the demand supply
equilibrium. Further, measures taken by various
countries to protect their domestic steel industry
has rendered Indian steel exports difficult, a large
quantum of which has found its way into the domestic
market. As a result, the domestic steel prices continued
to remain under severe pressure.
On the domestic front, the unit sales realisation
dropped by almost Rs.3,000 pmt vis-à-vis
the corresponding quarter last year and by Rs.500
pmt vis-à-vis the first quarter of the current
fiscal. Hot-rolled coils (HRC) prices currently
at around US$170-175/t in the international spot
markets are way below the breakeven price for most
steel companies.
Additional capacity of cold-rolled coils in the
domestic market has led to surplus availability
of cold-rolled products, further aggravating the
problems in the flat steel market. As against the
domestic demand for cold-rolled products at 3 million
tons, capacity exists for over 5 million tons including
new capacity of 1.2 million tonnes. Severe pressure
on the cold-rolled prices has forced the cold rolling
mills to demand substantial price reductions from
the hot-rolled coil producers.
All these issues have affected the performance of
Essar Steel in the second quarter.
Operational
Performance
Essar
Steel has been the largest exporter of hot-rolled
coils for the last 5 years. However, during the
current quarter, the exports dipped by 42.5% at
1.29 lakh tons vis-à-vis 2.25 lakh tons in
the corresponding period last year. This has forced
the Company to penetrate the domestic market, which
was already witnessing an oversupply situation,
necessitating the regulation of production. The
hot-rolled coil (HRC) production at 3.21 lakh tons
is lower by 20% compared to 4.02 lakh tons compared
to second quarter of last year. Whereas the domestic
sales at 2.19 lakh tons is higher by 2.6% compared
to 2.13 lakh tons in the corresponding period of
last year.
Financial
Performance
The
total income for the second quarter of the current
year is Rs.483.63 cr. After providing for total
expenses at Rs.467.22 cr. the operating profit stood
at Rs.16.41 cr. After making provisions for the
interest & other finance charges depreciation,
the Company incurred a loss of Rs. 92.77 cr.
Future Outlook
With the intrinsic
capacities of the Indian steel industry remaining
high, the oversupply situation is expected to adversely
impact the demand supply equilibrium, exerting downward
pressure on the prices. However, prompt response
in the near future to maintain supply discipline
will enable the industry to return to liquidity
and profitability. A lot depends on the support
from the Government to promote steel consumption
and addressal to the issues plaguing the industry.
Commenting
on the performance, Shri J. Mehra, MD said, “While
we have done everything within our control to contain
the costs, the drop in prices by almost 20% has
adversely affected the performance. We are in the
midst of a complete business re-structuring. On
completion of the same, the company is expected
to become resilient to the future downturns.”
ESSAR STEEL LIMITED
Regd. Office : Post Hazira, Pin 394 270, Dist
Surat
Corp.Office : Essar House, 11 Keshavrao Khadye
Marg, Mahalaxmi, Mumbai 400 034.
Unaudited Financial Results (Provisional) for
the quarter / half year ended 30th September,
2001
Particulars
Quarter ended
Half year
ended
(Rs
in crore) Previous Year
30.09.2001
30.09.2000
30.09.2001
30.09.2000
ended 31.03.2001
(audited)
Sales
477.67
684.50
1,054.84
1,370.74
2,518.83
Other Income
5.96
17.47
7.48
23.97
46.22
483.63
701.97
1,062.32
1,394.71
2,565.05
Expenditure
(a)(Increase) / Decrease in Finished
Goods / Work-in-Progress
64.14
68.59
101.16
(27.04)
(54.20)
(b)Materials Consumed
262.08
333.31
611.57
755.11
1,376.74
(c)Staff Cost
15.14
14.52
25.74
25.52
48.80
(d)Other Expenditure
125.86
118.27
253.45
249.44
586.01
Profit before Interest, Depreciation,
Amortisation and Taxation (EBIDTA)
16.41
167.28
70.40
391.68
607.70
Finance Cost (Net)
159.29
88.40
308.55
200.41
647.07
Profit / (Loss) before Depreciation,
Amortisation and Taxation
(142.88)
78.88
(238.15)
191.27
(39.37)
Deferred Revenue Expenditure written
off
15.79
13.28
31.49
26.57
67.44
Depreciation (Previous year net of
write back of depreciation for earlier
years)
104.10
64.54
207.01
158.81
239.10
Profit / (Loss) before Taxation
(262.77)
1.06
(476.65)
5.89
(345.91)
Provision for Current Tax
-
-
-
-
-
Provision for Deferred Tax
(170.00)
-
(170.00)
-
-
Net Profit / (Loss)
(92.77)
1.06
(306.65)
5.89
(345.91)
Paid-up Equity Share Capital
330.35
330.35
330.35
330.35
330.35
Reserves excluding revaluation reserves
655.98
Basic and Diluted Earnings Per Share
for the quarter, half year and for
the previous year (unannualised) (in
Rupees)
(2.81)
0.03
(9.28)
0.18
(10.47)
Notes:
The
above results were reviewed by the Audit Committee
in it's meeting held on 31st October, 2001
and taken on record at the meeting of Board
of Directors held on that date.
The above
results for the half year ended 30th September,
2001 have been subjected to limited review
by the statutory auditors of the company.
The qualifications by the
auditors in respect of the audited accounts
for the year ended 31st March, 2001, which
have a material impact on the said accounts,
have been extensively dealt with in the notes
forming part of the said accounts. Accordingly,
the said qualifications do not require additional
disclosures.
Interest has
been calculated on the basis of approval of
the lead Institution for it's loans. Approval
process by some of the participating Institutions
is under progress.
Consequent
to the Accounting Standard 22 - 'Accounting
for Taxes on Income' becoming mandatory with
effect from 1st April, 2001, the company has
accounted for estimated deferred tax credit
of Rs. 170 crores for the quarter / half year
ended 30th September, 2001. Any excess / shortfall
shall be appropriately adjusted in the following
quarters. Deferred tax asset / liability relating
to the earlier years shall be accounted for
in terms of the said accounting standard.
Depreciation
has been computed on the basis of units of
production method. The company has made appropriate
representations to the Government of India.
The aggregate
of non-promoter shareholding was 22,70,14,276
shares (67.92%) as on 30th September, 2001.
Figures have
been regrouped wherever necessary to make
them comparable.
Mumbai
31st October, 2001
J. Mehra
Managing Director
Media contact:
Corporate Communications:
Essar House, 11 K.K.Marg, Mahalaxmi, Mumbai
400034, India
CORPORATE
