The year saw the company achieving higher sales, both in terms of volume and value.

While the former grew by 10 per cent at 16.20 lakh tonne, the latter grew by 7 per cent to Rs 2,421.85 crore. Why was the percentage growth in value less compared to volume? The explanation lies in lower realisations for most part of the year, although the same improved in the last quarter.

Export volumes have registered a rise of 46 per cent at 6.45 tonne. While sales went northward, the consumption of raw material has declined by 10.38 per cent compared to the previous year, indicating better operational efficiency. Other expenditure has come down by around Rs 100 crore to Rs 692.15 crore. All these things translated into a higher OPM of 11.53 per cent from 8.06 per cent recorded last year. Not only that, the other encouraging sign is the level of inventories, which has seen a huge reduction of 45 per cent to 1.04 lakh tonne.

Interest cost has spoilt the party. It shot up from Rs 413.51 crore to Rs 545.52 crore. The result was a cash loss of Rs 218.02 crore. A high depreciation figure of Rs 329.81 crore is the normal feature of any capital intensive industry. Net losses for the company stood at Rs 581.24 crore.

Since the beginning of the fourth quarter, the company's performance has started improving significantly. Realisations have improved by 19 per cent for domestic sales and 28 per cent for exports, coupled with the sales volume going up by 17 per cent. Added to it, are the lower cost of power available from Essar Power, as it has got sufficient allocation of gas for the year, which was not the case last year.

The production cost per tonne is expected to be lower by Rs 1,500 compared to FY 1999-00 with lower power consumption per tonne of steel produced. The company has stated that it will produce 2.2 million tonne of steel during the year. This will be achieved by upgrading and debottlenecking production facilities without substantial capital expenditure. This involves stretching the electric arc furnace (EAF) to give an annual production rate of 2.4 million tonne by improving the plant's capability by increasing amperage from 130 Kamps to 150 Kamps.

With steel prices expected to settle down to around $300, realisations will be better by around Rs 1,500 per tonne. Overall, margins will increase by Rs 3,000 per tonne. The company proposes to reduce the debt during the current year by selling off its assets and investments. The 42 per cent stake in Essar Power and HGPL stake are expected to be put on block for sale. These measures will compliment Essar Steel's efficient working capital management.

According to the management, the current year's finance cost will be lower by around Rs 250 crore. The efforts to restructure debt in terms of maturity are also on. The company hopes to extend the maturity of the debt from the present level of about 3 years to 8 years. This will facilitate it to repay the debt from internal accruals.

Chowgule Steamships
Chowgule Steamships Ltd (CSL)'s financial results for the year ended March 2000, bear testimony to the problems faced by the Indian shipping industry. However, the scenario is likely to change in the current year. Overall improvement in freight rates is likely to enable the company to post a positive bottomline in the current fiscal ending March 2001, after a period of three years.

The company had posted a 17 per cent increase in turnover to Rs 81.87 crore for the year ended March, 2000 and has realised cash profits. The average realisation per ship in the dry bulk category has improved from $7,500 per day in 1999-2000 to the present $9,000 per day on account of overall improvement in the freight rates over the last year, according to the management. The average realisation in this category, which was languishing at $6,100 per day per ship in 1998-99 with the baltic feight index (BFI) below 1000 points has improved substantially with the BFI currently standing at 1,565 points.

The improvement in freight rates is on account of the acceleration in the production at the Japanese steel mills coupled with the revival of the South Asian economy, with the exception of Indonesia. It is expected that new construction activities taking place globally will further add to the volumes.

However, despite a growth in volume, the freight rates may stagnate at the current levels as analysts expect this to be the peak level.The improved performance by CSL is despite the fact that the government is not keen to protect the shipping industry and the Indian tonnage and the vessel capacity is going down.

Representations have been made to the government on various issues confronting the Indian shipping industry, and the industry expects some sops by way of soft finances for procuring ships. ICICI is also in the process of drafting a holistic paper on the shipping industry and piloting it at the various levels of the government.

CSL has a fleet of five panamax ships on international routes and six mini bulk ships to ply on domestic routes with the average age of the entire fleet being only six years against a life of 35 years. The company is one of the largest carriers of clinker cement on the Indian coastline from Surat to Ratnagiri. It can certainly hope for better days in future.

-- KSESH with contributions from Manish Joshi and Sachchidanand Shukla