Essar Steel back in black; posts profit of Rs 684 cr in FY15

New Delhi: Ruias-promoted Essar Steel Wednesday posted a net profit of Rs 684 crore for the full fiscal ended March 31, helped by better operating margins, consolidation and higher demand for its value added steel products.

The Mumbai-based company had posted a net loss of Rs 1,597.14 crore in the year-ago period, it said in a statement.

Gross revenue of the firm rose by 19.6 percent to Rs 17,162 crore in the fiscal from Rs 14,348 crore in the 2013-14 financial year, it added.

Essar Steel posted net loss in the last three years.

"Operating margins doubled to 18 percent in fiscal 2014- 15 as compared to 9 percent in FY 2013-14 due to various innovations and cost cutting measures in spite of a richer product mix," the firm said.

The company added that dollarisation of USD 2.2 billion helped in reducing its finance cost from 12 percent to 9 percent as well as increased the maturity period.

Moreover, the monetisation of the Odisha Slurry Pipeline and Oxygen plant for around Rs 4,850 crore also helped Essar Steel in firming up its balance sheet.

Besides, its holding company infused about Rs 1,300 crore in the firm, it added.

The company also plans to monetise Vizag Slurry pipeline and Coke Oven for around Rs 7,000 crore in the 2015-16.

It said these measures will provide the firm with around "Rs 12,000 crore, which will be utilised to strengthen the balance sheet and meet all its financial needs."

Essar Steel India Executive Vice Chairman Firdose Vandrevala said: "Essar Steel has completed all major projects at a competitive cost. The company's strategy to focus on value-added products, introducing new products, improved operating margins and cost saving, has aided the improved performance of the company."

For the fiscal 2014-15, total expenditure incurred stood at Rs 11,733 crore as against Rs 12,480 crore in 2013-14.

The firm's finance cost came down by 7.44 percent to Rs 3,865 crore compared with Rs 4176.4 crore year ago.

"Despite negative impact of lower prices due to rising imports, the company was able to get a premium on its products over market prices," the company said.

Lower input prices of basic raw material also helped the firm's balance sheet, it said.

Sales volume of steel products stood at 3.31 million tonnes (MT), which is marginally up by 2 percent compared with 3.24 MT in 2013-14.

Essar Steel sold 2.76 MT in the domestic market and 0.56 MT in the export market. 

In 2014-15, the operations of DRI (Direct Reduced Iron) units were constrained by non-availability of gas at a reasonable price. This was partially made good by using gas generated in the COREX units, it said.

"Reduced availability of Iron Ore from Odisha, due to mining restrictions following a Supreme Court order, also affected plans to ramp up the production at the steel plant. Operations of Odisha facility has since been fully stabilised and is now on course to ramp up the production," it added.

The seamless power supply at Hazira facility has been achieved through connectivity to the national power grid through 400 kv transmission line.

Additionally, the 300 MW coal-based power plant at Hazira is scheduled to be commissioned in the first quarter of 2015-16 and is expected to result in reduction in cost of power.

The strategy of focusing on value-added products for hydrocarbon, engineering, automotive and import-substitute products has helped improve profitability and negate the impact of rising cheaper imports, it said.

The company's approach to align R&D efforts with customer needs has resulted in 26 percent revenue coming from products that were developed in the last three years, it added.

"With an objective to ramp up production, the company is raising need-based working capital of Rs 4,000 crore. Further, the company plans to avail the 5/25 scheme of RBI to extend maturity," it said.

So far, Essar Steel had invested around Rs 45,000 crore in its steel business.

Vandrevala said: "We have drawn up a clear road map to strengthen the balance sheet through infusion of funds, ramping up the production and improving profitability to ensure sustainable operations of the company."