Public sector copper major Hindustan Copper Ltd has appointed a board sub-committee to chalk out a turnaround strategy for the company after the identification of specific problem areas.
The company closed the financial year 1996-97 with a net loss of Rs 130.62 crore. Addressing shareholders at the companys 30th annual general meeting yesterday, P Parvathisem, the newly appointed chairman and managing director of HCL said, the company would be undertaking several cost cutting measures during the current fiscal to turnaround its poor financial performance.
An important change that will be effected during the year would be to shut down the Mosaboni mines whose high cost concentrate can be profitable only if LME prices rule at Rs 440. The notice for closure of the mines was served in July, this year.
The company will also curtail the production of wire rods during the year in order to bring down its inventory pile-ups. It has also cancelled the shipment of 5000 tonne of copper cathodes from Chile as a cost cutting measure. Advertising budgets will also be slashed during the current fiscal.
During the current financial year, the capacity of the companys Khetri Copper Complex will be expanded to 1,00,000 tonne form the existing capacity of 31,000 tonne. According to company projections the profit from the complex after the expansion would be Rs 180 crore per year, Parvathisem said.
The sales performance of the company in the first six months of the current financial year has not been as good as the physical performance, he added. The reason for the depleted performance is increased competition from entrants in the market. In this regard the company has already initiated steps for rectifying the problem. The company plans to intensify customer contact and also implement mid-month review of prices after studying market conditions. For its Bhopal operations the company has taken a decision of running its Indore office operations virtually independent of its overall operations.
Commenting on the reasons for incurring losses last year, Parvathisem said, the primary reason was the fluctuating LME prices which prevailed during most of the year. Custom duty reductions to 30 per cent also affected the profit bottomlines. Considerable loss of production was experienced due to an accidental fire at one of the complexes. A major reason for losses was the closure of the Khetri and two other complexes compelled by power shortage resulting in losses to the tune of Rs 17 crore.
The company will shut down the Mosaboni mines and also curtail wire rods production to bring down inventory pile ups
