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Seven-fold rise in Tata Steel net

Calcutta, Oct. 30: Second-quarter net profit at Tata Iron and Steel Company Ltd (Tisco), the largest steel maker in the private sector, increased 7.4 times, from Rs 27.36 crore in July-September 2001 to Rs 203.18 crore.

First-half net profit stood at Rs 269.10 crore, up from Rs 47.90 crore in the corresponding period last year. The numbers that represent the highest-ever rate of growth the company has seen was made possible because of hardening in steel prices over the past few months.

A senior company official said demand in the domestic market has been picking up for a while, giving steel companies a breather, at least in the first half.

“With the reduction in banks’ interest rates, the economy is bound to look up with further growth in industry. We are hopeful that we will be able to maintain profitability for the entire financial year,” he said.

Operating profit at Rs 518 crore in the quarter was higher than Rs 286.26 crore in the three months to September 2001. Turnover increased to Rs 2207.03 crore from Rs 1932.93 crore.

The steel business remains the major contributor to earnings. In the second quarter, it accounted Rs 2011.01 crore of the turnover, others generating only Rs 305.85 crore. Total capital employed in steel was Rs 8152.41 crore.

What has boosted the company’s sales further during the second quarter is pursuit of a branding exercise. Although no data on branded product sales have been offered, sources put it at Rs 600 crore in the first half.

Meanwhile, the Tisco board approved the amalgamation of Tata SSL with the company. The Rs 250-crore investment to set up a 1.2-lakh tonne ferro-chrome plant in South Africa’s Richards Bay was also cleared. It has entered into an agreement with ESCOM.

The company, which has been a believer in core competence, is diversifying to tap opportunities in other sectors so that it can attain the right kind of balance.

The focus is on cost reduction, which the steel-maker has said will continue over the next four to five years. Tisco, one of the world’s leading low-cost steel makers, looks at cost management as a way to enhance competitiveness.

Tisco’s productivity is currently 160 tonnes per man per year. The target is to raise that level to 400 tonnes.

Besides ‘right-sizing’, the company is pruning hierarchies in its structure to speed up decision making. It has been emphasising the need for decentralising financial powers and decision-making authority. Its rural marketing arm, which it believes has not been harnessed to potential, has good prospects.

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