SEIL implements measures to cut production costs

Vizag-based Steel Exchange India Limited (SEIL), a steel trading and manufacturing company, is concentrating on realising more profitability than increasing its turnover during this fiscal.

"Currently, we are finding ways to reduce our production costs, even though the steel market is sluggish, so as to increase our profitability. We expect a growth of 50 per cent in our net profits if the markets improve. But if it is the other way round, then our growth in net profits will be limited to 20 per cent this fiscal," B Suresh Kumar, director of Steel Exchange India, told Business Standard.

SEIL currently operates a 42,000-tonne capacity Simhadri TMT steel bars manufacturing unit at Visakhapatnam besides a 60,000-tonne capacity steel ingots mill at Ravulapalem in East Godavari district.

"At present, we are purchasing billets from Visakhapatnam Steel Plant (VSP). For this, we have to shell out more to keep our TMT steel bars mill running. If we could use more ingots that are being produced at our Ravulapalem unit as raw material, our profitability will increase by about Rs 15,000 per tonne," Kumar explained.

SEIL's Ravulapalem unit has a capacity to produce 60,000 tonnes of ingots a year. The company is planning to increase the capacity to around 85,000 tonnes by the end of this fiscal at an investment of Rs 10 crore.

"We are at present using steel scrap and sponge iron as raw material to manufacture steel ingots. We have recently completed the banking arrangements by opening a letter of credit to import 30,000 tonnes of scrap from other countries. The prices of imported scrap are a bit lower than that of local scrap. By using imported scrap at our Ravulapalem unit, our productivity and quality will increase. This will result in the increase in our profitability," Kumar said.

In the fiscal ended March 31, 2005, SEIL registered a turnover of close to Rs 340 crore. The company expects to close the current fiscal with a turnover of about Rs 355 crore.

Kumar said that the company was not expecting much growth in its turnover in the current fiscal. "Depending on the market conditions, our bottomline may increase by 20 to 50 per cent," he said.

"Steel prices have come down in the international market. Keeping this in mind, we have imported 10,000 tonnes of steel re-bars from Turkey and have been selling the same in the domestic market. SEIL is earning around Rs 1,000 on each tonne in this transaction," Kumar said.

"In the 2004-05 fiscal, we traded about one lakh tonnes of steel in the domestic market. If the present market conditions prevail for a few more months, we plan to import more quantities of steel to cater to the needs of the local market," he added.