Essar Steel is set to achieve a capacity utilisation of 80 - 85% in financial year 2016-17.
Production has doubled since November and the company is currently operating at 70% capacity utilisation. This has resulted in significant improvement in the EBIDTA margin which has improved to 18-20% from 5% in November last year, Essar said in a presentation.
“The all-round efforts of the company in various facets of its operation like production, sales, marketing and cost improvements have resulted in an excellent operational turnaround and resurgence of Essar Steel,” it said.
Essar Steel has completed all the upstream and downstream projects at a competitive cost to achieve 10 mtpa and all units have become operational. The availability of gas at economical price has enabled Essar Steel to operationalise the gas-based DRI units as well. This is further aided by the captive gas from COREX and blast furnace.
“Our efforts over the last few months in strengthening our operations, supported by stable markets and encouraging response from our customers, has given us the confidence to aim at full production in the next fiscal. It is heartening that we are able to achieve this while maintaining higher operating margins. We believe it is comforting to all our stakeholders,” Dilip Oommen, MD & CEO said.
The gas price has fallen to USD 6/mmbtu from USD 15/mmbtu. Lower gas price and other input costs have enabled the company to contain its costs and improve margins. Essar Steel expects to restart all the DRI units in the next fiscal.
The customer outreach initiative undertaken by the company has facilitated it to sell not only its production but also enable it carry one of the lowest finished goods inventory levels in the industry at 15 days leading to better working capital management. The multi-modal transport adopted by Essar Steel enabled the company get better price in its major markets of Gujarat and Maharashtra.
The introduction of MIP and BIS standards by the Government of India has helped in curbing imports of steel at predatory prices, leading to containing the oversupply situation and better sales realisation in the Indian market, the company added in its presentation.