New Delhi, May 25: Helped by buoyant steel prices, state-run Steel Authority of India Ltd today announced a three-and-a-half fold increase in gross profits at Rs 9,512 crore on a turnover of Rs 31,287 crore for 2004-05.
Better results saw chairman V. S. Jain promising a Rs 3,500-crore investment in upgrading facilities at Rourkela, Bokaro and Bhilai, besides commitments in IISCO, which may be merged with SAIL soon.
Higher steel prices saw not only profits and turnover going up but also enabled the PSU giant to announce a 33 per cent dividend. The company managed to stash away an added Rs 5,326 crore as reserves, while keeping a Rs 1,846-crore provision for deferred tax payment. SAIL have to pay the tax next year, once it comes out of its current status as a firm liable to pay just the minimum alternate tax.
Four major SAIL plants ' Bhilai, Bokaro, Durgapur and Rourkela ' have made profits this year. Earlier, Rourkela and Durgapur had proved to be drags on the steel giant. Only the Alloy Steel Plant at Durgapur and Visvesarya Steel Plant, which it had taken over in the 1990s, made small losses.
Last year, SAIL had managed a turnaround by recording a Rs 22-crore surplus after wiping out all accumulated losses and reducing its debt-equity ratio from a high of 6.5:1 to 1.86:1.
The former blue-chip started sinking into the red in 1998-99, when it ran up losses for the first time. It had suffered a Rs 1,574-crore loss that year, forcing the Central government, its owner, to sit up and order a restructuring based on a study by McKinsey & Company. For five straight years till 2002-03, the steel major kept bleeding, before staging a turnaround last year on the back of higher prices.
SAIL officials said an increase in steel demand, coupled with a series of price hikes in 2004-05, helped rake in more revenues. This was aided by an increase in production and sales volumes, improvement in product-mix, cost-cutting measures and reducing borrowing costs.
During 2004-05, SAILís saleable steel production grew from 2.31 million tonnes (MT) in the first quarter to 2.7 MT in the second, then to 2.94 MT in the third and finally 3.1 MT in the fourth quarter. It had reported a profit before tax of Rs 1,205 crore in April-June 2004, Rs 1,823 crore in July-September, Rs 2,711 crore in October-December and Rs 3,626 crore in January-March 2005.
The consolidation of the companyís finances was the outcome of a well-orchestrated strategy in a buoyant market. The measures included an increase in production and sales volumes, a better product-mix and a rise in the proportion of special steel. Higher utilisation of the continuous casting process, improvement in techno-economics and prudent financial management also played a key role in boosting sales.