Strengthening the Present Shaping the Future
It gives me immense pleasure to welcome you all to the 35th Annual General Meeting of your company. You may please recall that in my maiden address in last year’s AGM, I had stated that with your support, it would be my endeavour to take your company to new heights and provide greater value to the stakeholders. I report with humility and pride that your company has performed well in the year 2006-07 and today it is stronger than ever.
The financial year 2006-07 has been an eventful year for your company as well as for the steel industry. With finished steel output crossing 52 million tonnes and consumption touching 46 million tonnes in 2006-07, India has reached fifth position amongst the world’s steel producing countries behind China, Japan, the US and Russia.
India today is one of the fastest growing economies with a compounded annual growth rate of 8.6% in the last three years. GDP growth for 2006-07 has been 9.4%, whereas steel consumption in India during the same period increased by 11.4%. The forecast of growth of above 8.5% for the current year and actual GDP growth of 9.3% for April-June ’07 augurs well for SAIL and the steel industry in India.
Record Performance in 2006-07
Your company achieved a new record in production of saleable steel at 12.6 million tonnes during 2006-07 with capacity utilisation touching a new high of 114%. Special thrust was given during the year on production of value added and special steel items and I am glad to report that your company produced 3 million tonnes of these products, representing a quarter of its total production during 2006-07 thereby recording a growth of 17% over the previous year.
It is heartening to inform that at Rs. 39,189 crore, your company achieved its highest-ever turnover, registering a growth of 21% over the previous year and more than doubling its turnover of Rs. 19,207 crore achieved during 2002-03. The company also achieved best ever EBIDTA at Rs. 10,966 crore and profit before tax of Rs. 9,423 crore representing an increase of 49% and 65% respectively over the previous year.
During 2006-07, your company had the distinction of being the first metal company in the country to attain a market capitalisation of Rs. 50,000 crore in February ’07 which has since gone up to about Rs. 70,000 crore. I am glad to announce the Board’s recommendation for a final dividend of 15% for the year 2006-07 and with an interim dividend of 16% already paid, total dividend for the year would be 31% of the paid-up equity as against 20% in the previous year.
The year witnessed further growth in the company’s net worth to Rs. 17,184 crore; an increase of Rs. 4,798 crore over the last year and a substantial jump from a low of Rs. 1,989 crore during 2002-03. This has enabled the company to improve its debt-to-equity ratio to 0.24:1 as of 31st March, 2007.
With a view to increase the size and reach of its marketing network and make SAIL products available across the length and breadth of the country, the company added 453 new dealers covering 430 districts, bringing the total to 653 dealers covering 527 districts as on 31st March, 2007. Today, your company has its presence in as many as 600 out of 603 districts of the country, through its network of stockyards, C&F agency yards and dealers’ outlets.
To achieve sustainable growth and to foster a motivational climate, your company took several initiatives for human resource development during the year. As a result, labour productivity increased to an all-time high. Besides involving front-line workmen in the planning processes, a system of tracking and rewarding creativity and innovations by employees on a daily basis was introduced for the first time, generating great enthusiasm at all levels to think and deliver innovatively.
The company gave special thrust for further improving techno-economic parameters during the year, resulting in record continuous cast production of 8.3 million tonnes (up by 5%), achievement of lowest-ever coke rate, best-ever blast furnace productivity and lowest-ever energy consumption per tonne of crude steel. Specific power consumption also reduced by 4% as compared to the previous year. Cost reduction measures at all levels and productivity improvement through systemic and innovative approaches resulted in cost saving of Rs. 400 crore during the year.
R&D and New Product Development
R&D efforts were intensified across the organisation and several projects were undertaken in diverse areas like yield improvement, cost competitiveness, quality and process improvements. SAIL’s R&D Centre secured 40 patents and 38 copyrights during 2006-07.
The company introduced several new products during the year such as HCR-EQR TMT for earthquake resistant construction, rock bolt TMT for tunnel construction, EN series HR coils for LPG cylinders, MC 12 HR coils for chains, etc. In addition, Bhilai Steel Plant developed high-strength vanadium rails, Durgapur Steel Plant produced S-profile wheels for high-speed locos and Rourkela Steel Plant rolled special plates which were used for the indigenously built rocket PSLV C-7. Your company takes pride in supplying steel for critical usage in projects of national importance, including several products for defence purposes.
The tempo of growth has been maintained in the current year as well through further optimisation of the company’s resources. In the first quarter of the current financial year, the company has achieved record turnover with profit after tax at Rs. 1,525 crore, being highest ever in any first quarter. The strong financial performance has contributed to enhanced cash generation and further reduction in debt-equity ratio to 0.18:1 as on 30th June, 2007. This would provide a strong financial base to support the modernisation and expansion programmes being undertaken by your company.
Production of 1,244 million tonnes of crude steel in the world in 2006 registered a growth of 8.9% over 2005. Global steel trade also increased by 13% to 395 million tonnes in 2006. This trend has continued in 2007, with world crude steel production for the first seven months of the year reaching 762 million tonnes, registering a growth of 8%. China produced 279 million tonnes in this period, a growth of 18.5% over the corresponding period last year.
During 2007, global crude steel production is expected to reach 1,300 million tonnes, of which more than one-third will be contributed by China. With the continued strong demand for steel, the international steel scenario remains buoyant. Strong positive growth trends are foreseen in Africa, Asia and South America in 2007. However, the soaring prices of key inputs such as coal, coke, iron ore, scrap, ferro-alloys, etc., have been the area of major concern for steel producers.
In 2006, the top 15 steel producers accounted for one-third of global crude steel production as against 26% ten years ago. The process of consolidation in the global steel industry got a major boost with the Arcelor-Mittal merger, thereby forming a global giant accounting for about 10% of world’s production. This trend is likely to continue and we can expect more transnational mergers and acquisitions. China also has planned consolidation whereby more than 50% of its production by the year 2010 shall be coming from the top 10 steel producers in the country. All these developments would throw up new challenges for your company for which several strategic initiatives are being taken.
With its highly skilled and committed workforce, largely captive raw materials, nationwide marketing network and available infrastructure to support further expansions, SAIL is today well poised to play a vital role in the growth phase of the country. To contribute to the growth of the Indian steel sector and maintain its leadership position in the domestic steel market, your company has prepared a road map for enhancing its annual hot metal production from the present level of 14.6 million tonnes to over 26 million tonnes through modernisation and expansion programmes being undertaken in all of its five integrated steel plants. The project completion schedules are also being compressed to the year 2010, against
2011-12 planned earlier.
The implementation of modernisation and expansion schemes would help in eliminating technological obsolescence, enriching product-mix with share of finished steel increasing to almost 100% and introduction of customer-centric processes, apart from upgrading infrastructural facilities in the plants to support higher volumes. This gigantic task requires meticulous planning and coordination with a large number of agencies, selection of right technology and prudent fund management. Your company has initiated actions in all these areas. A number of capital projects have already been commissioned during the year and several others are under implementation, namely, rebuilding of coke oven batteries, installation of slab caster, coal dust injection in blast furnaces, secondary refining units and schemes related to automation and IT. Along with additional new facilities, existing facilities are also being upgraded to enable higher production of value added steel with overall improvement in productivity.
An IISI study projects the demand for steel in India to reach 160 to 180 million tonnes by 2020. To maintain its market dominance in the long term, your company is simultaneously working on a blueprint for growth beyond 2010.
Your company has also taken several initiatives to strengthen its raw material supply base. To meet the growing needs of iron ore, apart from expanding existing mines at Bolani and Gua, new mines are being developed. Forest and environment clearances of the Rowghat iron ore deposit have been recommended by the State Government and are in an advanced stage for approval by the Central Government. As regards coking coal, actions have been taken for development of Sitanala as well as Tasra coal blocks. Besides, your company along with other major PSUs is seeking to obtain equity in international coal blocks as a long-term security measure. The production from existing captive coal mines of the company is also being stepped up. To augment availability of ferro-alloys, an MoU has been signed with Manganese Ore India Limited for setting up a joint venture unit at Bhilai.
With a view to find a long-term market for its solid waste disposal and add value, your company is setting up a joint venture cement plant at Bhilai/Satna with annual production capacity of 2.2 million tonnes. Actions have also been taken to set up joint venture cement plants at Bokaro and Rourkela. In order to meet the increasing demand for power, apart from 500 MW expansion at Bhilai, under implementation as a joint venture with NTPC, an additional power plant of 500 MW at Bokaro is being set up by SAIL’s joint venture company BPSCL. To promote your company’s business further, a memorandum of understanding has been signed with RINL and NMDC for jointly setting up a greenfield plant in Chhattisgarh. Action has been taken for development of a multi-product steel-based Special Economic Zone at Salem. Recently, your company has also signed an MoU with POSCO, Korea for a comprehensive strategic alliance.
Responsibility towards Society
With the underlying philosophy and a credo ‘to make a meaningful difference in people’s lives’, SAIL has been in the forefront of fulfilling its obligations to society since its inception. Recently, the Hon’ble Prime Minister, Dr. Manmohan Singh, gave a clarion call to corporate India to “be a partner in making ours a more humane and just society”. Your company has earmarked a budget of Rs. 100 crore for the current year towards its Corporate Social Responsibility.
The large healthcare infrastructure network created by the company by establishing 39 primary health centres, 18 reproductive and child health centres, 19 hospitals including 4 super-speciality hospitals provides specialised healthcare to over 2 million people every year. Apart from operating about 150 schools in steel townships providing education to over 80,000 children, direct and indirect assistance is being provided to more than 250 schools in peripheral areas. The girl:boy ratio of 1:1 is an important characteristic of SAIL schools, which have a rare distinction of 95% survival rate. Continuous efforts by the company to provide best educational facilities have taken literacy rate to 80% in SAIL townships, much above the national average.
Your company became the first public sector undertaking to receive the prestigious Business World-FICCI-SEDF Corporate Social Responsibility Award - 2006 which was presented by the then Hon’ble President of India, on 7th May, 2007.
Your company’s Corporate Environmental Policy emphasises ‘conducting our operations in an environmentally responsible manner to comply with applicable regulations and striving to go beyond’. The company recognises its responsibility of environment protection and has fully complied with the norms set for water consumption, air emission from batteries and solid waste utilisation. The company planted around 3 lakh trees during 2006-07 and restored over 150 acres of degraded mining area at Purnapani under the MoU between Delhi University’s Department of Biotechnology and SAIL.
Your company’s plants located at Bhilai, Bokaro and Salem, some departments of Durgpaur Steel Plant, Rourkela Steel Plant and IISCO Steel Plant and iron ore mines at Dalli, Kiriburu, Meghahatuburu and Bolani have been certified for environmental management system ISO:14001. Efforts are being made towards implementation of ISO:14001 across all units of the company. Your company is also actively associating itself with the Kyoto Protocol and Asia Pacific Partnership for Clean Climate Development Programme under the Clean Development Mechanism.
Your company’s excellent performance received due recognition from all quarters during 2006-07. This included Vishwakarma Rashtriya Puraskar for 2005 awarded to 41 of its employees for their extraordinary contribution in bringing about laudable improvements in their areas of work. Ten employees also received the national Shram Awards for 2004. Other major awards received by the company include BM Munjal Award for Excellence in Learning and Development in Public Sector category for the year 2006, National Sustainability Award 2006 to Salem Steel Plant by the Indian Institute of Metals, National Safety Awards for the year 2002 and 2003 to Raw Materials Division presented by the Hon’ble Vice President of India on 14th February 2007 and Rajiv Gandhi National Quality Award for 2006 to Bhilai Steel Plant by the Bureau of Indian Standards.
All the above accolades and excellence in performance could not have been possible but for the dedication and unstinted efforts of every member of SAIL collective. I gratefully acknowledge the contribution of our workforce, which is our biggest asset and is at the core of our strategies. I also take this opportunity on behalf of the SAIL collective and my colleagues on the SAIL Board, to acknowledge the support extended by the esteemed shareholders of the company. We look forward to receiving your continued support in future as well. We are also thankful to the Ministry of Steel, Government of India, state governments, other organisations and institutions for reposing confidence in the company. I am sure that with inherent strengths and timely measures to face the future challenges, your company is poised for a sustainable growth for all its stakeholders.
20th September, 2007
(S K Roongta)