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
|
