Tata Steel will post record profits this year and become economic value added positive company on average steel prices over the last five years.
The company became EVA positive on prevailing prices, last year but, this time around it would be EVA positive on prices over the last steel cycle. To cite an example, the average hot rolled coil prices, which were hovering at $245-250 per tonne were now ruling at more than $500 per tonne.
B Muthuraman, managing director, Tata Steel, said at the company's annual conference that 50 per cent of improvement in financial performance would come from improvement in product mix, volume and focus on market segments.
The company would increasingly move away from dependence on spot prices. Output sold on spot prices or monthly prices would reduce from 47 per cent to 15 per cent in flat products.
Tata Steel would also work towards a richer product mix. While the share of hot rolled products and semis would decrease, cold rolled, galvanised and longs would increase. Muthuraman said the company would strive to move up the value chain.
GLOBAL PRESENCE: Meanwhile, the company has set a target of establishing global presence within this financial year, as part of its growth strategy. Muthuraman said at the company's annual conference that the company was evaluating several global opportunities and the plan would be given shape during this financial year.
Without divulging details of acquisition plan, Muthuraman indicated that the acquisition would be big. The company made a start with the acquisition of Mascons in Sri Lanka but Muthuraman clarified that Mascons was a small acquisition and major acquisition would take place now.
He admitted Tata Steel had visited some countries like Ukraine, China and Singapore, for the purpose.
The company was also looking overseas for cutting input costs. Tata Steel has entered into a joint venture with a Thai company for limestone.
T Mukherjee, deputy managing director (operations) and chairman of the joint venture said that Tata Steel would hold 49 per cent in the company. The joint venture, yet to be named had taken up lease for a limestone mine.
Muthuraman said that the move would be cost-effective for Tata Steel. The long-term plan as chalked out by the company included connecting domestic and global operations.
Tata Steel planned to achieve 15 million tonne of crude steel production by 2010, out of which half of the capacity would come up at Jamshedpur. The balance would be spread over alternative location in India and overseas. For its one million tonne expansion at Jamshedpur, Tata Steel would have to shut down its largest blast furnace, "G" for 100 days, which would result in loss of 3 lakh tonne of production.
However, Tata Steel would counter the loss with a host of measures. The company would increase iron ore production by more than 50 per cent and supply surplus to other steel companies.
The company would trade own raw material for billets, slabs, pig iron and sponge iron with other steel plants.
Also, the company would convert contracts of coal and iron ore to coke, sponge and pig iron.
