New Delhi, May 3: With steel prices firming up, Essar Steel expects to breakeven in the current financial year ending March 2001 after posting heavylosses in the last two years. "We are confident of breaking even this year,"the company's managing director J Mehra told The Financial Express. Mehrasaid the debt-equity ratio would also be brought down to 1.5:1 over the nextthree years from the current level of 2.3:1.With export growth of over 45 per cent to 6.66 lakh tonnes in 1999-2000, thecompany has identified export as a major thrust area and hopes to touch 1.2million metric mark during the current fiscal.
The company plans to open up new markets for its products in south-east Asiaincluding China, which is turning out to be a major consumer of steel. Mehrasaid middle-east countries are other lucrative markets which the companywould pursue.
Mehra said the focus would be on marketing products in niche markets whichoffer premium over the market rates and also develop premium qualityproducts. In the domestic market, the company is targeting customers ofvalue added grades such as electrical grade steel, extra deep drawing, linepipe grade and hi-tensile steel etc.
Mehra said though the total debt on the company was over Rs 4200 crore, thedebt profile consists of some good investment. "Some of the investments wehave made, including non-steel businesses, would give us good value when wedivest them. Our total debt profile is much better compared to many othersin the steel industry," Mehra said.
The managing director said the company has chalked up a three-prongedstrategy to beef up share holders' value which covers cost reduction,increase in volumes through in-house technological innovation andimprovement in sales realisation. The company has appointed Ernst & Young tohelp identify major opportunities for reducing cost of operations. Theinternational consultancy firm would also benchmark Essar Steel practiceswith best operating steel mills in the world to bridge performance gaps.
Mehra said the company was working on cutting its power cost by reducing thespecific consumption of power. "As much as 30 per cent of our steelproduction cost goes towards power. We had earlier ignored the potential ofwaste heat generated by the plant. We are now trying to recover power fromour waste heat which is a zero cost fuel," he said. The company proposes togenerate 70mw power from in-house waste heat.
Commenting on the outlook in the steel sector, Mehra said,"Asian economy hasstarted recovering and there has been an increase in consumption. From nowon, we can expect a more stable market."
Copyright © 2000 Indian Express Newspapers (Bombay) Ltd.