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 You are at : Message from Mr. Jindal
 

Driven by the core values from the legacy and vision of inclusive growth of my father,Late ShriO.P. Jindal and our commitment of value creation for all our stakeholders, your Company scaled new heights of glory in 2010-11.

I take this opportunity to share with you JSW Steel's remarkable performance in 2010-11 and our strategy to sustain the growth momentum over the coming years.

Indian economy

India retained its position as the second fastest growing nation globally with the Indian economy growing at 8.5% in 2010-11. The highlight was the robust growth in the agriculture sector at 6.6% in 2010-11 against 0.4% growth in 2009-10.

Headline inflation witnessed a relentless rise in 2010-11. Despite government intervention through large scale tightening of monetary policy, inflation continues to remain close to the double digit mark.

Steel sector

Driven by the strong global economic growth, world crude steel production registered a 15% growth in C.Y. 2010 against a negative 7% growth in C.Y.2009. China continued its dominance in the global steel market while India ranked fourth in the global steel markets. Domestic steel demand grew at 10.6% to 66 million tonnes in 2010-11 propelled by robust private fixed asset investment.

The World Steel Association has projected a 6%growth in the global steel demand, while domestic steel demand is estimated to grow at 13.3% in 2011. A net importer status coupled with growing focus on manufacturing and infrastructure creation, the Indian steel sector is slated to witness a promising future over the coming years.

JSW Steel

In 2010-11, your Company's standalone net sales increased 27% YoY to ` 23,163 crores primarily on account of higher sales realisations and better product mix, even as crude steel production grew only 7% YoY to 6.43 million tonnes.

Operations

In year 2010-11, we started the commissioning of“Project Cheetah” to become India's largest steel plant at a single location.

•  We commissioned beneficiation plant at Vijayanagar works to utilize the low grade iron ore fines. We also commissioned our new sinter plant to enhance the sinter % in the feed which will further increase the productivity of our blast furnaces and reduce the fuel consumption.

•  We commissioned state-of-the-art Coke Oven #4, Steel melt shop –II and Hot Strip Mill during the year;

•  I would like to take this opportunity to inform you that last week, we started our 4 th blast furnace and presently it is under trial run. I hope soon we will declare the commissioning of this project. With the commissioning of Blast Furnace 4, Vijayanagar Works will become a 10 million tonne facility at par with World class steel makers.

•  We commissioned our blooming mill at Salem Works and received a number of product approvals from global and large domestic customers.

We entered into a technical and equity arrangement with JFE to upgrade our steel-making processes in line with global best practices. This augments our ability to make niche products that find applications in the automobile sector – these are presently being imported into India.

A new chapter was written in the history of Indian Steel Industry when your Company acquired 45.53% majority stake in Ispat Industries, which was subsequently increased to 49.3% through an open offer. With the acquisition of majority stake your Company has 14.3 million tonne steel capacity and has become the largest Steel producer of India.

Raw material

During the year under review, your Company took definitive steps to cement its input security which is extremely essential considering the unprecedented changes in contractual terms and pricing in the coking coal and iron ore space.

We acquired coking coal mines with estimated reserves of 161 million tonnes in West Virginia, USA. We have secured all permits for the three operational mines and we expect to commence production in the current year. Production will be ramped up to 3 million tonnes in 3 years.

Our Bella Vista iron ore mines commenced commercial operations in April 2011; we expect to draw 1 million tonnes of ore in 2011-12. We plan to escalate mining in Chile to 3 million tonnes per annum over the next three years.

In addition, coal and iron mining leases in various regions within India are at different stages of regulatory approvals.

Your Company continues to aggressively scout for more raw material assets within India and globally for which it has instituted an experienced and energetic team.

Overseas operations

Overseas operations improved considerably in 2010-11. An increase in capacity utilisation, streamlined operations and recovering market demand resulted in our US subsidiary registering a positive operating profit of US$15.03 million in FY11. We expect capacity utilization to improve from the current level of 10% to 40% in 2011-12. This optimism stems from a strong economic environment and robust demand for pipes in that geography, which augurs well for the unit.

Outlook for the future

Demand for steel is expected to grow over the coming years. This optimism is borne out from an important reality. The top four Indian steel makers are expected to increase their capacity by 26% in 2011-12 taking India'ssteelmaking capacity to 98 million tonnes , according to government estimates.

According to a World Steel Association report, India's steel consumption is forecast to grow 13.3% in 2011-12 and 14.3% in the following year, more than double the pace of the global demand.

Hence, while volumes would increase, operating margins are expected to remain depressed. This is largely on account of higher prices of inputs.

While operating margins are expected to decline marginally in 2011- 12 (as against the fourth quarter of 2010-11) due to higher coking coal prices, the Company's earnings are expected to increase through volume growth, higher raw material integration from its international resource bases and increased cost efficiencies through enhanced capacities in captive power, captive coke, beneficiation, sintering and pelletisation .

West Bengal Project: We have commenced work on our proposed West Bengal project for the first phase for a 3.0 million tonne steel plant and 300 MW captive power plant. We expect to complete the first phase in three years.

Capacity expansion up to 12 million ton at Vijayanagar works: The Company has made assessment of the existing facilities at Vijayanagar works and based on findings, we have decided to increase the capacity by additional 2 million tonnes per annum.

CSR & inclusive growth

I have always believed that Corporate Social Responsibility is the soul behind our steel. You will be proud to know that your Company is engaged in a number of socially constructive community building projects. The Earth Care Awards instituted jointly with The Times of India is another initiative by your Company, to promote environment and cultural consciousness in society.

Your Company has also supported the Green Initiative of the Ministry of Corporate affairs. Our Annual Report for this year has also been printed on eco–friendly paper.

Acknowledgements

Finally, I'd like to place on record my sincere gratitude and appreciation to all our shareholders, investors, bankers, financial institutions, contractors, vendors, suppliers, and above all, our customers, for their consistent support and trust.

I'd also like to thank the Central Government, the State Governments and the Governments of all countries where JSW Steel and its subsidiaries operate.

I'd like to thank each and every member of the Board for their solid support and enormous encouragement.

Finally, I would like to specially acknowledge the commitment and dedication of the entire JSW team in creating and sustaining a truly world class enterprise.

With best wishes,

SAJJAN JINDAL

 
 
 
CSR Initiative
An independent Trust, named JSW Foundation, administers the social development initiatives of the JSW group. Mrs. Sangita Jindal chairs the Foundation.
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