TATA STEEL LIMITED
ANNUAL REPORT 2010-2011
DIRECTOR'S REPORT
To the Members,
The Board of Directors hereby presents the 104th annual report on the
business and operations of your Company along with the standalone and
consolidated summary financial statements for the year ended 31st March,
2011.
Figures in Rs. crores
Tata Steel Standalone Tata Steel Group
2010-11 2009-10 2010-11 2009-10
Net Sales/Income
from Operations 29,396.35 25,021.98 1,18,753.12 1,02,393.12
Total expenditure
before depreciation 17,963.49 16,069.89 1,02,757.50 94,350.46
(net of expenditure
transferred to
capital)
Operating Profit 11,432.86 8,952.09 15,995.62 8,042.66
Add: Dividend and
other income 790.67 853.79 980.98 1,185.85
Profit before
interest,
depreciation,
exceptional items
and taxes 12,223.53 9,805.88 16,976.60 9,228.51
Less: Net finance
charges 1,300.49 1,508.40 2,770.04 3,022.06
Profit before
depreciation,
exceptional items
and taxes 10,923.04 8,297.48 14,206.56 6,206.45
Less: Depreciation 1,146.19 1,083.18 4,414.82 4,491.73
Profit before
exceptional items
and taxes 9,776.85 7,214.30 9,791.74 1,714.72
Add/(Less):
Restructuring costs - - 2,310.21 (1,683.72)
Profit before taxes 9,776.85 7,214.30 12,101.95 31.00
Less: Provision for
current taxation 2,857.00 1,998.00 2,910.34 2,162.53
Less: Provision for
deferred taxation 54.16 169.50 335.56 (10.69)
Profit after taxes 6,865.69 5,046.80 8,856.05 (2,120.84)
Less: Minority
Interest - - (60.28) 15.24
Add: Share of profit
of Associates - - 66.36 126.86
Profit after
minority interest
and share of profit
of associates - - 8,982.69 (2,009.22)
Distribution on
hybrid perpetual
securities 6.79 - 6.79 -
Tax effect on
distribution of hybrid
perpetual securities (2.25) - (2.25) -
Profit after taxes and
distribution on hybrid
perpetual securities 6,861.15 5,046.80 8,978.15 (2,009.22)
Add: Balance brought
forward from the
previous year 12,772.65 9,496.70 7,010.48 10,961.96
Add: Balance brought
forward - HMPCL on
Amalgamation - 12.28 - -
Balance 19,633.80 14,555.78 15,988.63 8,952.74
Which the Directors
have apportioned as
under to:
(i) Dividend on
Preference Shares - 45.88 - 45.88
(ii) Proposed
dividend on
Ordinary Shares 1,151.06 709.77 1,150.25 709.23
(iii) Tax on
dividends 156.71 122.80 163.22 154.33
(iv) Special Reserve - - 5.32 48.55
(v) General Reserve 686.57 504.68 703.42 552.58
(vi) Debenture
Redemption
Reserve 1,000.00 400.00 1,007.26 400.00
(vii) Statutory
Reserve - - - 31.69
Balance to be
carried forward 16,639.46 12,772.65 12,959.16 7,010.48
DIVIDEND
The Board recommended dividend of Rs. 12 per Ordinary Share on 95,92,14,450
Ordinary Shares (2009-10: Rs. 8 per Ordinary Share on 88,72,14,196 Ordinary
Shares of Rs. 10/- each) for the year ended 31st March, 2011.
The dividend on Ordinary Shares is subject to the approval of the
shareholders at the Annual General Meeting. The total dividend payout works
out to 19% (2009-10: 17%) for the standalone company.
INCREASE IN AUTHORISED SHARE CAPITAL
In order to facilitate the issue of Ordinary Shares with differential
voting rights as to voting and/or dividend (hereinafter referred to as 'A'
Ordinary Shares) in the future, the authorised share capital of the Company
was increased from Rs. 8,000 crores to Rs. 8,350 crores by creation of a
new class of Capital viz. 35,00,00,000 'A' Ordinary Shares of Rs. 10 each
aggregating to Rs. 350 crores.
PREFERENTIAL ISSUE OF SHARES AND WARRANTS TO TATA SONS LIMITED
Pursuant to the shareholders' approval obtained through Postal Ballot, the
following securities were allotted to Tata Sons Limited on 23rd July, 2010:
i. 1,50,00,000 Ordinary Shares of Rs. 10/- each at a premium of Rs. 584/-
per share aggregating to Rs. 891 crores and
ii. 1,20,00,000 Warrants, where each Warrant would entitle Tata Sons
Limited to subscribe to one Ordinary Share of the Company at a price of
Rs.594/- per share. As per the SEBI (ICDR Regulations 2009), an
amount equivalent to 25% of the price i.e. Rs. 148.50 per Warrant
aggregating to Rs. 178.20 crores was received from Tata Sons Limited.
The option to convert the Warrants into Ordinary Shares is
exercisable by Tata Sons Limited before 23rd January, 2012.
FOLLOW-ON PUBLIC ISSUE OF ORDINARY
SHARES
The Company completed a follow-on public issue of 5,70,00,000 Ordinary
Shares of Rs. 10/- each at a price of Rs. 610 per share (including premium
of Rs.600 per share) aggregating to Rs. 3,477 crores. The Ordinary Shares
were allotted on 29th January, 2011 in accordance with the terms contained
in the Prospectus dated 25th January, 2011.
GLOBAL ECONOMY
The world GDP, as reported by International Monetary Fund, was on an
upturn, growing by 5% in 2010 as compared to a negative growth of 0.5% in
2009. While the growth in the advanced economies was 3.0% in 2010, in
contrast to -3.4% in 2009, the emerging and developing economies
grew by 7.3% in 2010 when compared to the growth of 2.7% in 2009. The
growth in the developing and emerging economies slowed down during the
end of 2010 as stimulus measures were slowly removed and policies were
tightened in response to rising inflation and overheating concerns. A trend
of GDP growth (%) for the last five years in the world, split up into
advanced economies and emerging and developing economies.
The US: The US GDP increased by 2.8% in 2010 as compared to a negative
growth of 2.6% in 2009, but the country still faces large fiscal deficit.
In late 2009 and early 2010 there was a deceleration in growth in the US
economy as the effect of one time stimulus factors faded. However, in the
second half of the year, growth picked up with a decline in the rate of
unemployment and consumer spending picking up at its fastest pace in the
last five years with further major stimulus measures being introduced along
with tax cuts and investment incentives. The housing market, non-
residential construction and overall credit growth still remained weak with
tight bank lending conditions starting to ease for not only large firms but
also for small and medium-sized firms.
India: As reported in the Economic Survey of 2010-11, GDP is expected to
grow by 8.6% in 2010-11 as compared to the growth of 8.0% in 2009-10. The
agricultural output grew by 5.4% as compared to a nominal 0.4% growth in
2009-10 when the country was hit by a deficient monsoon. Manufacturing grew
by 8.8% during the year being at par with the growth noticed in the last
fiscal. Overall growth in industry was 8.1% during 2010-11 compared to 8.0%
in the last year. Services witnessed a decelerated growth of 9.6% as
compared to a growth of 10.1% in 2009-10. Amongst the key macro-economic
indicators, fiscal deficit was limited to 4.8% of GDP in 2010-11 as
compared to 6.3% in 2009-10. Export and import grew positively by 29.5% and
19.0% in contrast to the negative growths experienced in the previous year.
Clouds of high inflation and a temporary slowdown in the industrial growth
are looming in the country as steps are being taken to mitigate such
adversities.
Europe: GDP in the Eurozone increased by 1.9% in 2010-11 over 2009-10 with
a high unemployment rate of around 10% and divergent performances by member
countries. While Germany posted a growth of 4% driven by strong export
demand and lower unemployment, the Spanish economy was adversely affected
by fiscal tightening and a weak housing market with a rise in unemployment.
Ireland, Portugal and Greece are seeking financial assistance from the EU
and IMF after facing sharp increases in their borrowing costs and potential
shortfall in funding. The UK GDP grew by 1.9% in 2010-11, continuing to
recover but uneven growth, high unemployment and rising inflation has
resulted in the UK household disposable income coming under pressure. There
was a strong quarterly growth at the beginning of the year followed by a
slowdown and winter-inflicted contraction in the December quarter. The
fiscal austerity announced by the UK Government will see a 24% cut in
public investment and 7% cut in real government consumption in the next
five years.
TATA STEEL GROUP PERFORMANCE
Tata Steel Group steel deliveries at 23.5 million tonnes in the financial
year under review were at par with the financial year 2009-10 (23.6 million
tonnes). The gross steel deliveries (including the inter-group transfers)
for the steel-producing entities were higher than the previous years with
Tata Steel India, Tata Steel Europe, NatSteel Holdings and Tata Steel
Thailand posting growth of 4%, 3%, 1% and 8% respectively. Your company's
Indian operations recorded a growth of 4% in steel deliveries from 6.17
million tonnes in the financial year 2009-10 to 6.42 million tonnes in
2010-11.
Along with the increase in gross steel deliveries, the steel-producing
entities witnessed increases in the average realisations in line with the
steep increase in the raw material prices. The turnover for the Group in
2010-11 at Rs. 118,753 crores, was 16% higher than 2009-10 102,393 crores).
While the turnover in Tata Steel India witnessed a growth of 17% from
Rs.25,022 crores in the financial year 2009-10 to Rs. 29,396 crores in
the
financial year 2010-11, Tata Steel Europe's turnover increased by 15% from
Rs. 65,843 crores in the financial year 2009-10 to Rs. 75,991 crores in the
financial year 2010-11.
The Earnings before Interest, Taxes, Depreciation and Amortisation (EBITDA)
of the Group increased significantly from Rs. 9,340 crores in the fiscal
year 2009-10 to Rs. 17,103 crores in the financial year 2010-11 primarily
driven by the increase in prices partly offset by the steep increase in
input costs. Tata Steel India recorded an EBITDA of Rs. 12,224 crores in
the financial year 2010-11 growing by 25% as compared to Rs. 9,806 crores
in 2009-10.
Restructuring, impairment and disposals in the current year include
Rs.2,503 crores profit on disposal of Teesside Cast Products at Tata
Steel Europe.
Consequently, the Group turned around with a Profit after Tax (after
minority interest and share of profits of associates) for 2010-11 at
Rs.8,983 crores as compared to a loss of Rs. 2,009 crores in 2009-10.
Indian Operations: Crude steel production at 6.86 million tonnes in
financial year 2010-11 was higher than the previous year (6.56 million
tonnes) by 4%, thus exceeding the nameplate production capacity in the
second year on enhanced capacity. There was an increase in the vessel life
and heat size of the two steel melting shops enhancing their productivity
to achieve the higher crude steel production of your company. Saleable
steel also increased by 4% from 6.44 million tonnes recorded in financial
year 2009-10 to 6.69 million tonnes in the financial year under review with
higher hot metal being available from the bigger blast furnaces with higher
productivity. The sales volume during the financial year 2010-11 at 6.42
million tonnes was 4% higher as compared to the previous year (6.17 million
tonnes) indicating the robust growth in steel demand. Apart from the two
steel melting shops, there were many units (including mines and collieries)
which surpassed their respective best ever performances.
Ferro Alloys and Minerals division's saleable production at 1,405k tonnes
in the financial year 2010-11 was higher than financial year 2009-10
(1,350k tonnes) by 4%. The sales (including transfers to other divisions of
the Company), however, at 1,464k tonnes were lower than the previous year
(1,508k tonnes) by 3%. Chrome alloys exports and manganese alloys sales of
the division touched new heights during the financial year under review.
Improved demand in auto and infrastructure segments led to the increase in
sales and production in the Tubes division. The division recorded
production of 371k tonnes in FY 2010-11, higher by 6% over FY 2009-10 (351k
tonnes), while the sales improved from 349k tonnes in FY2009-10 to 366k
tonnes in 2010-11, an increase of 5%. Boosted by various improvement
initiatives under 'Kar Vijay Har Shikhar' programme, the division continued
to improve on its performance in various segments like 'Tata Pipes'
(plumbing and irrigation), 'Tata Structura' (infrastructure) and Precision
Tubes (Automotive, Process and Power sector).
Sales in the Bearings division in the financial year 2010-11 at 32.95
million numbers grew by 4% against the financial year 2009-10 (31.69
million numbers), while the production at 33.14 million numbers in FY 2010-
11 increased by 12% over FY 2009-10 (29.61 million numbers). The increases
were primarily driven by higher demand in the domestic auto segment.
European operations: Sales volumes of Tata Steel Europe (TSE), excluding
seasonal effects, were reasonably flat for the first three quarters of the
financial year 2010-11, before showing an improvement in the last quarter
to the highest level of quarterly sales since financial year 2008-09.
Deliveries in Tata Steel Europe during FY 2010-11 (14.9 million tonnes)
increased by 3% over FY 2009-10 (14.4 million tonnes). Selling prices
increased steadily through the year with the revenue per tonne increasing
by around 17% over the previous year. The revenue per tonne increased
relatively sharply in the first quarter of the financial year under review
in anticipation of the equally sharp increase in price of raw materials,
but became more modest in the second and third quarters before losing its
upward momentum in the fourth quarter. Raw material prices, in contrast,
peaked during the third quarter.
TSE has adopted the Tata Steel identity for trading purposes with effect
from September 2010 and a progressive rebranding process is under way. The
Company has also adopted a new operating model to replace the previous
model of three main operating divisions (Strip Products, Long Products and
Distribution & Building Systems). It is now organised into a number of
business activities comprising steelmaking hubs (Strip Products Mainland
Europe, Strip Products UK and Long Products Europe), speciality businesses
(Colours, Building Systems, Packaging, Tubes, Kalzip, Plating, Cogent Power
and Speciality Steel), and a distribution and sales network (Distribution
UK & Ireland, Distribution Europe and International). TSE has adopted a
single sales and marketing function with eight industry-focused marketing
sectors, namely automotive, construction, packaging, rail, lifting and
excavating, energy and power, industry strip and industry long products.
Europe, principally the EU, continues to be the most important market of
the Company.
On 24th February, 2011, Tata Steel UK Limited (TSUK), a subsidiary of TSE,
signed a definitive sale agreement to sell certain assets of TCP to
Sahaviriya Steel Industries Public Company Limited in a deal valuing the
business at Pound 434 million. The assets covered by the sale include the
Redcar blast furnace, the Redcar and South Bank coke ovens, TCP's power
generation facilities and sinter plant, and the Lackenby steelmaking
and casting facilities. The deal also includes TSUK and SSI entering
into a joint venture to operate Redcar wharf, TCP's bulk terminal.
The sale was completed on 24th March, 2011.
The 'Fit for the Future' programme initiated in response to the financial
crisis continued to give results with notable reduction in the average
number of employees. The deal with SSI resulted in 850 employees getting
transferred to SSI and it is expected that further jobs will be created.
South-East Asian operations: NatSteel recorded an increase in steel sales
by 1% in FY 2010-11 (1.80 million tonnes) over FY 2009-10 (1.78 million
tonnes). The increases were most noticeable in NatSteel Singapore, the
Australian units, Thailand and in trading business, while other business
units in China and Vietnam witnessed decline in their respective volumes.
NatSteel Singapore increased its sales volume by 106k tonnes from 738k
tonnes in FY 2009-10 to 844k tonnes in FY 2010-11. Average revenue per
tonne improved across all units (other than Australian units) thereby
increasing the turnover of the Company. The Company sold its share in an
associate company Southern Steel Berhard (SSB) during the financial year.
The EBITDA of the Company, excluding the profit on sale of share of SSB in
the financial year under review, reduced from the previous financial year
primarily due to rise in the cost of input materials which more than offset
the increase in prices and impact of higher sales volumes.
Sales volume of Tata Steel Thailand during FY 2010-11 at 1.29 million
tonnes was higher than FY 2009-10 (1.20 million tonnes) by 8%, while
production increased by 6% from 1.21 million tonnes in FY 2009-10 to 1.28
million tonnes in FY 2010-11. During the financial year under review, the
Company had to mothball the Mini Blast Furnace in the third quarter due to
high costs of operations and low capacity utilisation, before recommencing
its operations in the fourth quarter. The company incurred losses during
the year primarily due to high costs of operations, low capacity
utilisation and losses due to mothballing of the Mini Blast furnace partly
compensated by increase in average revenue per tonne and higher sales
volume.
EXPANSION PROJECTS
Brownfield Projects:
Tata Steel India is implementing an expansion project at Jamshedpur Works
to increase its crude steel capacity from 6.8 million tonnes per annum to
9.7 million tonnes per annum. The facilities under this project are
scheduled to be completed in FY 2011-12. Simultaneously, the Company is
implementing a few other major capital schemes at Jamshedpur which include
Coke Plant Battery No. 11, Coke Dry Quenching at Coke Ovens Batteries 5, 6
& 7 and a new mill for producing Full Hard Cold Rolled (FHCR) coils. Tata
Steel India is also setting up a Continuous Annealing and Processing Line
at Jamshedpur with a capacity of 0.6 mtpa under a joint venture company
with Nippon Steel Corporation (NSC), Japan. The line will produce
automotive cold rolled flat products and address the needs of Indian
automotive customers for high-grade cold rolled steel sheets. NSC will
transfer its technology for producing high-grade cold rolled steel sheets
for automotive application including skin panel and high tensile steel.
These projects, along with other sustenance and improvement projects, are
being implemented with a view to support your Company's current operations
and its growth aspirations.
Greenfield Projects:
Odisha Project:
Preliminary work on the 6 mtpa greenfield steel plant at Kalinganagar,
Odisha is in progress. The boundary wall on 3 sides (8.5 km) along with
trench cutting and barbed wire fencing has been completed, warehouse has
been made operational and construction of Sinter plant has started. As of
March 2011, a total of 910 families have moved from the plant site to the
new rehabilitation colony area where plot allocation has been started. The
rehabilitation colonies have been provided with good infrastructural
facilities which include clean drinking water, street lighting, and a
community centre set up by the Company. Key challenges for FY 2011-12 are
to develop infrastructure and mobilise resources to accelerate the project
work.
Other projects:
Chhattisgarh Project:
The Company has signed an MoU with the Government of Chhattisgarh for
setting up of a 5 mtpa Greenfield integrated steel plant in Bastar. Land
has been acquired by the
Government and the rights vest with Chhattisgarh State Industrial
Development Corporation (CSIDC) for allotment to Tata Steel Limited for 99
years. The letter of intent from CSIDC has been issued. Your Company
requested for demarcation free from all encumbrances, as per terms of MoU,
before taking possession of the said land.
Further, Chhattisgarh Government has accorded approval for drawing water
from the river Sabri and the Ministry of Railways, Government of India has
granted an in-principle approval for the railway corridor. Public hearing
for the Environment Clearance has been successfully conducted.
Prospecting License for iron ore has been granted in Bailadila-I deposits
after obtaining necessary approvals from the Ministry of Environment and
Forest and Ministry of Mines, Government of India. Prospecting License for
Pyroxenite in the close proximity of iron ore area is in an advanced stage
of grant by the State Government. In line with the Company's initiatives in
the field of Corporate Social Responsibility, several activities in the
field of health, youth and women empowerment, sports and skill development
are being carried out for local residents as well as those from displaced
families.
Ha Tinh Project at Vietnam:
Tata Steel signed an MoU with Vietnam Steel Corporation (VSC) on 29th May,
2008 to develop a steel complex with an estimated capacity of 4.5 million
tonnes per year in Ha Tinh province at Vietnam. Another MoU was signed to
set up a cold rolling mill in Ha Tinh province. On successful completion of
study and financial closure, Tata Steel will have a stake of minimum 65%
and VSC will have a stake of 35% in the steel complex.
Karnataka Project:
Tata Metaliks Limited (TML) and Tata Steel have entered into a MoU with the
Government of Karnataka in June 2010 for setting up an integrated steel
plant of 3 mtpa in Agadi and Boodagatti villages of Haveri District,
Karnataka. State High Level Clearance Committee of the Government of
Karnataka has approved 2,500 acres of land at Agadi, Boodagatti, Devagiri
and Yellapura villages, and is in process of acquiring land.
RAW MATERIAL PROJECTS
Your Company continues to implement its long-term strategy to secure
ownership of assets that will increase its raw materials security and share
of value-added products. During the financial year 2010-11, the Company's
primary focus was on expediting implementation of its existing ventures.
Coal Projects:
Benga Coal Project, Mozambique: The Tata-Riversdale Joint Venture in
Mozambique conducted a formal 'Ground Breaking Ceremony' at the Benga Coal
Project in the presence of the President of the Republic of Mozambique, His
Excellency Armando Emilio Guebuza on 14th April, 2010. This official
ceremony follows a series of milestones already achieved by the Company
such as the signing of the Mining Contract, approval of Environmental
Licences for the Benga Coal Project and the Benga Power Project, and the
approval of Stage 1 of the Benga Coal Project following the completion of
the Feasibility Study for production of 10.6 million ROM tonnes in two
phases. Other key contracts and agreements include the CHP Plant Supply
Contract, a Resettlement Action Plan and the Project Labour Agreement (PLA)
which was signed with SINTICIM (the Mozambican National Construction and
Mine workers Union).
Stage 1 entails initial production of 5.3 million ROM tonnes per year to
produce approximately 1.7 mtpa of high quality hard coking coal and 0.3
mtpa of thermal coal by the second half of 2011. Tata Steel has 35% stake
in the joint venture with 40% off-take right to the coking coal produced
from these mines. The joint venture owns the Benga and Tete tenements which
cover an area of 24,960 hectares. Benga has an inferred resource of
approximately 4 billion tonnes. Your Company plans to supply the hard
coking coal from this project to its facilities in Europe in the initial
phase of the project development and also for the requirements of the
Indian operations in the future. Tata Steel currently holds about a 27.1%
equity stake in the parent company, Riversdale Mining Limited.
Coal Mining Project in Australia (CDJV): Tata Steel has a strategic
interest of 5% in the coal mining project in Australia in partnership with
Vale, Nippon Steel, JFE and POSCO with up to 20% off-take rights. The Joint
Venture was formed for the development of a greenfield underground coal
project in Bowen Basin, Queensland. The first raw coal production started
in August 2006 and the mine is currently producing around 1.5 mtpa. The
mine is being operated by Long Wall method and expected to produce around
3.0 million tonnes of Coking and PCI coal during FY 2011-12.
Iron Ore Projects:
Direct Shipping Ore Project in Canada (New Millennium Capital Corporation):
In September 2008, Tata Steel had entered into a Heads of Agreement with
New Millennium Capital Corporation, Canada (NML), a Canadian listed mining
company, to develop iron ore projects in northern Quebec and Newfoundland
and Labrador and had acquired a 19.9% stake in NML. As per the agreement,
Tata Steel had an exclusive option to acquire an 80% equity interest in
NML's Direct Shipping Ore project (DSO Project) and an exclusive right to
negotiate and settle a proposed transaction in respect of NML's LabMag and
KeMag (Taconite) Projects. In September 2010, Tata Steel has made a
positive investment decision by exercising its option to acquire 80%
interest in the NML's Direct Shipping Ore ('DSO') Project.
As part of the Joint Venture agreement, Tata Steel will reimburse NML for
80% of NML's cost to date on the DSO Project; arrange funding for up to
CAD$ 300 million of capital costs for the Project to earn its 80% share of
the JV and commit to take 100% of the DSO project's iron ore products of
specified quality, at world market prices, for the life of the mining
operation. The Feasibility Study estimates proven and probable mineral
reserves of 64.1 million tonnes and the project is expected to produce 4
million dry tonnes per year of iron ore products commencing in the second
half of 2012. The iron ore from this project will be supplied to Tata Steel
Group's facilities located in Europe.
On 26th February, 2011, Tata Steel purchased 67,39,956 common shares of NML
under its existing pre-emptive right at CAD$ 3.50 per share for gross
proceeds to NML of CAD$ 23,589,846. This will maintain Tata Steel's
interest in NML at approximately 27.2% of the total shares outstanding.
On 6th March, 2011 Tata Steel signed a binding heads of agreement with New
Millennium Capital Corporation to develop the LabMag and KeMag iron ore
deposits, known collectively as the Taconite Project. The Taconite Project
consists of two world-class magnetite iron ore deposits on the emerging
Millennium Iron Range, which stretches 210 kilometres from western Labrador
through eastern Quebec. The LabMag deposit is located in the Labrador
portion of the range and the KeMag deposit is located in the Quebec
portion. Together, the two deposits hold over 9 billion tonnes of reserves
and resources and are expected to produce more than 20 million tonnes per
year of concentrate, with a potential mine life of over 100 years.
Ivory Coast Project: In view of the environmental issues encountered in the
case of Mt. Nimba deposit, Tata Steel approached the Government of Ivory
Coast to grant a Prospecting License for Mt. Gao for an early start of the
project. The Government of Ivory Coast has granted an Exploration
License to Sodemi on 30th July, 2009 and an Addendum to the Joint Venture
Agreement was signed on 29th September, 2009 to include Mt. Gao in the
Joint Venture Agreement. Upon transferring the Exploration License for Mt.
Gao to the JV company, a helicopter-borne geophysical survey covering 811
sq km has been completed. The team on the site has also done a detailed
geological mapping over a 100 sq km area at 1:10000 scale. Currently
exploration work on the ground has been put on hold due to rising security
concern in Ivory Coast.
Limestone Project:
Limestone Project in Oman: The Environmental Impact Assessment has been
completed and the mining license is awaited.
OTHER PROJECTS
Dhamra Port Company Limited (DPCL):
The Dhamra Port Company Limited, a 50:50 joint venture between Tata Steel
Limited and Larsen & Toubro, is developing a deep-draught port under a
concession agreement awarded by the Government of Odisha on Build, Own,
Operate, Share and Transfer (BOOST) basis. The project will be located on
the eastern coast of India approximately 225 km southwest of Kolkata and
205 km from Bhubaneshwar.
Situated between Haldia and Paradip, Dhamra Port will be one of the deepest
ports in India with a draft of 18 metres, capable of accommodating super
capesize vessels up to 1,80,000 DWT.
Phase-I of the project is complete and the port has started commercial
operations on 6th May, 2011. In Phase-I, two fully mechanised berths; one
for handling import cargo and the other for export cargo with back-up
facilities have been built, along with a rail corridor for hinterland
connectivity. The construction of railway line on a route length 62 km from
Bhadrak to Dhamra is completed except commissioning of the automated
signaling system. The capacity is estimated to be 27 mtpa in Phase-I.
Dhamra Port will be of strategic importance to Tata Steel in terms of its
integrated logistics cost of raw materials and will also consolidate Tata
Steel's supply chain network, contributing to its expansion aspirations.
S&T Mining Limited:
S&T Mining Limited is a joint venture between Tata Steel Limited and Steel
Authority of India Limited to develop the raw material security. The
company was shortlisted by CIL to participate in the tender for reviving
and developing abandoned mines. It has made progress on its proposal to set
up a 2 mtpa coal washery in Jharkhand for which it is in an advanced stage
of environmental clearance. It is also gearing up for participating in the
Coal auction process of Ministry of Coal, Government of India.
HEALTH AND SAFETY
Health and Safety continues to be a key performance indicator and one of
the prime drivers of the Corporate Vision of your Company. The Group Vision
is to achieve a target of 0.4 LTIFR with zero fatalities by 2012. Tata
Steel's safety and health responsibilities are driven by the belief within
our policy which was launched for Tata Steel group from January 2011: 'The
safety and health of all the people who work in and with the Tata Steel
Group is our number one priority.' In pursuance of this belief, we are
committed to continual efforts to improve health and safety in Tata Steel
as we strive for excellence.
Health and Safety is reviewed at all Board meetings of your Company with a
Health, Safety and Environment committee incorporating senior executives
and non-executives from the Board also established to carry out more
detailed reviews. The integrated and systemic Health and Safety Management
System introduced in Tata Steel Europe in 2008 with a governance process
for improvement actions and regular safety tours by the Board and executive
members is being evaluated for Tata Steel Group-wide application.
During the financial year 2010-11, the Group recorded a LTIFR of 0.78
improving by 18% against 0.95 in FY2009-10. Tragically, during the
financial year under review there were 10 fatalities across the Group which
included 5 contractor employees. The Board expresses its sincere regret at
these fatalities and is committed to learning from each of these incidents
to prevent any recurrence and also in its implementation of measures to
ensure that any fatality potential is identified and controlled in our
operations.
The safeguarding and promotion of the physical, mental and social well-
being of employees of the Group has been enhanced from a number of
programmes across the Group. In India, the programme 'Wellness at
Workplace' targets the major health risks such as heart disease, diabetes
and includes proactive reviewing of individual medical condition and
identifying improvements. In Europe, health promotion is also done on major
risks such as cancer, heart disease with an additional focus on minimising
exposure to potential health hazards like noise, vibration and the need to
use personal protective equipment.
ENVIRONMENT
Tata Steel Group puts emphasis on minimising the environmental impact of
its operations and its products by adopting sustainable practices and
continuous improvements in environmental performance. Manufacturing steel
unavoidably produces carbon dioxide (CO2). However, Tata Steel products are
part of the solution to climate change as steel has inherent environmental
advantages of being durable, adaptable, reusable and recyclable. CO2
emissions in steel production are offset by reductions in emissions through
the life cycle of steel products, achieved through effective product design
and through recycling at end of life. Furthermore, your Company aims to
contribute positively to the communities around or near its operations,
actively participating in community initiatives, encouraging biodiversity
and nature conservation.
One of the key corporate goals which your Company seeks to achieve is to
reduce carbon dioxide (CO2) emissions per tonne of crude steel produced.
The current targets, which are provisional and are under review pending
regulatory developments in both India and Europe, are to reduce emissions
on a group-wide basis to less than 1.9 tonnes of CO2 per tonne of crude
steel by 2015 and to less than 1.7 tonnes of CO2 per tonne of crude steel
by 2020 (using the World Steel Association reporting scope and
methodology). CO2 emissions for the Tata Steel Group during FY 2010-11 were
2.15 tonnes per tonne of crude steel for Blast Furnace route steel (2.01
tonnes per tonne of crude steel including Electric Arc Furnace route
steel).
CO2 emission (direct + electricity) in the Indian operations during FY
2010-11 at 2.44 tonnes per tonne of crude steel was almost at the same
level as the last year (2.41 tonne per tonne of crude steel), while the
water pollutant discharge was 65 gallons per tonne of crude steel in FY
2010-11 improving 26% as compared to 88 gallons per tonne of crude steel in
2009-10. Solid waste utilisation also improved from 91.1% in 2009-10 to
94.4% in 2010-11. Environmental clearances for 2.9 million tonne expansion
programme for Jamshedpur Steel Works and Chhattisgarh project were obtained
along with the consent to establish the Cold Rolling Mill complex at Bara,
Jamshedpur.
In the European operations, the CO2 emissions were 2.0 tonnes per tonne of
crude steel. More generally, compliance with environmental permit
conditions was at a very high level across the European operations during
the financial year and there were no prosecutions or regulatory enforcement
actions in relation to environmental matters. Furthermore, TSE met all of
its environmental obligations as specified under Phase 1 (2005 till 2007)
of the EU Emissions Trading Scheme (EU ETS) and expects to meet its
obligations for Phase 2 (2008 till 2012). In the UK, the revised target
within the Climate Change Levy ('CCL') Agreement to reduce absolute energy
consumption by 15.8% compared to 1997 levels was achieved in 2010. This
ensures that Tata Steel Europe will continue to benefit from reduced rates
in relation to the CCL for 2011 and 2012. The UK government announced in
the 2011 budget their intention to introduce a 'carbon price floor' with
effect from FY 2013-14. This is an additional tax on electricity generation
related to the carbon intensity of the generation fuel used, which would
come into effect if the price of carbon in the EU ETS does not reach
certain thresholds. TSE also currently participates in a voluntary
agreement with the Dutch government to benchmark and maintain its energy
efficiency in line with world's best standards. The primary requirement of
the agreement is an energy efficiency improvement of 2% per annum. The
total energy efficiency improvement in 2010 was 2.8%.
SUBSIDIARIES
The consolidated financial statements presented by the Company include
financial information of its subsidiaries prepared in compliance with
applicable Accounting Standards. The Ministry of Corporate Affairs,
Government of India vide its Circular No. 5/12/2007-CL-III dated 8th
February, 2011 has granted general exemption under Section 212(8) of the
Companies Act, 1956, from attaching the balance sheet, profit and loss
account and other documents of the subsidiary companies to the balance
sheet of the Company, provided certain conditions are fulfilled.
Accordingly, annual accounts of the subsidiary companies and the related
detailed information will be made available to the holding and subsidiary
companies' investors seeking such information at any point of time. The
annual accounts of the subsidiary companies will also be kept for
inspection by any investor at its Head Office in Mumbai and that of the
subsidiary companies concerned.
Details of major subsidiaries of the Company are covered in this Annual
Report.
DIRECTORS
Dr. Karl-Ulrich Koehler has been Chief Executive Officer and Managing
Director of Tata Steel Europe Limited since 1st October, 2010. He was
appointed Chief Operating Officer of Tata Steel Europe Limited in February
2010. Considering his vast experience of 30 years in the steel industry,
the Board thought it prudent to appoint Dr. Koehler as an Additional Non-
Executive Non-Independent Director of the Company with effect from
12th
November, 2010.
Dr. Koehler will hold office till the date of the forthcoming Annual
General Meeting and a notice has been received from a Member proposing the
candidature of Dr. Koehler for being appointed as a Director of the
Company.
Mr. Kirby Adams ceased to be a Director of the Company on 30th September,
2010. The Directors would like to place on record their appreciation of the
contributions made by Mr. Kirby Adams during his tenure as Director of the
Company.
Dr. J. J. Irani will step down as a Director of the Company on 2nd June,
2011 on reaching the age of 75 years, and hence will not be seeking re-
appointment. The Directors would like to place on record their appreciation
of the leadership and contributions made by Dr. Irani as the Managing
Director of the Company from 1992 to 2001 and thereafter, as a non-
executive Director of the Company. Therefore in accordance with the
provisions of the Companies Act, 1956, and the Company's Articles of
Association, Mr. Ratan N. Tata, Mr. Nusli N. Wadia, Mr. Subodh Bhargava and
Mr. Jacobus Schraven retire by rotation and are eligible for re-
appointment.
ENERGY, TECHNOLOGY AND FOREIGN EXCHANGE
Details of energy conservation and research and development activities
undertaken by the Company along with the information in accordance with the
provisions of Section 217(1)(e) of the Companies Act, 1956, read with the
Companies (Disclosure of Particulars in the Report of Board of Directors)
Rules, 1988, are given in Annexure 'A' to the Directors' Report.
PARTICULARS OF EMPLOYEES
The information required under Section 217(2A) of the Companies Act, 1956
and the Rules there under, in respect of the employees of the Company, is
provided in the Annexure forming part of this Report. In terms of Section
219(1)(b)(iv) of the Act, the Report and Accounts are being sent to the
Members, excluding the aforesaid Annexure. The Annexure is available for
inspection by Members at the Registered Office of the Company during
business hours on working days upto the date of the ensuing AGM, and if any
Member is interested in obtaining a copy thereof such Member may write to
the Company Secretary, whereupon a copy would be sent.
CORPORATE GOVERNANCE
Pursuant to Clause 49 of the Listing Agreements with the Stock Exchanges, a
Management Discussion and Analysis, Corporate Governance Report, Managing
Director's and Auditors' Certificate regarding compliance of conditions of
Corporate Governance are made a part of the Annual Report. A note on the
Company's corporate sustainability initiatives is also included.
DIRECTORS' RESPONSIBILITY STATEMENT
Pursuant to Section 217(2AA) of the Companies Act, 1956, the Directors,
based on the representations received from the Operating Management,
confirm that:
1. in the preparation of the annual accounts, the applicable accounting
standards have been followed and that there are no material departures;
2. they have, in the selection of the Accounting Policies, consulted the
Statutory Auditors and have applied them consistently and made judgements
and estimates that are reasonable and prudent so as to give a true and fair
view of the state of affairs of the Company at the end of the financial
year and of the profit of the Company for that period;
3. they have taken proper and sufficient care to the best of their
knowledge and ability for the maintenance of adequate accounting records in
accordance with the provisions of the Companies Act, 1956, for safeguarding
the assets of the Company and for preventing and detecting fraud and other
irregularities;
4. they have prepared the annual accounts on a going concern basis.
On behalf of the Board of Directors
RATAN N. TATA
Chairman
Mumbai, 25th May, 2011
Declaration Regarding Compliance by Board Members And Senior Management
Personnel With The Code Of Conduct
This is to confirm that the Company has adopted Tata Code of Conduct for
its employees including the Managing Director and Whole-time Directors. In
addition, the Company has adopted the Tata Code of Conduct for Non-
Executive Directors. Both these Codes are posted on the Company's website.
I confirm that the Company has in respect of the financial year ended 31st
March, 2011, received from the senior management team of the Company and
the Members of the Board a declaration of compliance with the Code of
Conduct as applicable to them.
For the purpose of this declaration, Senior Management Team means the
Members of the Management one level below the Managing Director as on 31st
March, 2011.
H.M. NERURKAR
Mumbai, 25th May, 2011 Managing Director
Annexure 'A' to Directors' Report
Particulars for Tata Steel Limited, the standalone entity, required under
the Companies (Disclosure of Particulars in the Report of the Board of
Directors) Rules, 1988:
Conservation of Energy
a. Energy Conservation measures taken:
i. Waste heat recovery from Pressure Reducing & De-Superheating (PRDS) at
Power House # 5 resulted in additional 3 MW power generations.
ii. Use of regenerative burners for lean gas (i.e. Blast Furnace Gas) at
3rd reheating Furnace of Hot Strip Mill.
iii. Modification in LD gas export system, which has resulted in higher LD
Gas recovery.
iv. Execution of interconnection of Praxair 1 & 2 Plants to reduce Oxygen
delay at Steel Making stage.
v. Efficient use of by-product gases for Power Generation.
vi. Higher availability of Top recovery turbine for Power generation.
b. Additional investments and proposal for reduction of consumption of
energy:
i. Installation and commissioning of new LD Gas Holder (capacity: 100000
cum) and its export system.
ii. Recovery of sensible heat of coke by installation of Coke Dry Quenching
system in Batteries #10 & 11 at Coke Plant.
iii Installation and commissioning of Thin Slab casting & rolling (TSCR).
iv. Installation and commissioning of 'I' Blast Furnace with Top Recovery
Turbine.
c. Impact of the above measures:
Energy Conservation measures during 2010-2011 has resulted in achieving:
i. Lowest ever Plant Specific Energy Consumption - 6.006 Gcal/tcs.
ii. Lowest ever middling consumption - 14.16 kg/tss.
iii. Highest ever LD Gas Recovery - 50,697 Nm3/hr
iv. Lowest ever Plant Power Rate - 356 kWh/tss
v. Highest ever combine boiler efficiency - 85.13%.
vi. Lowest ever Fuel rate at Hot Strip Mill - 0.292 Gcal/t.
vii. Higher Power generation through Top Recovery Turbine - 16.01 MW.
Form - A
Form for disclosure of particulars with respect to Conservation of Energy:
2010-11
Particulars 2010-11 2009-10 Difference Reasons for variation
A. POWER AND
FUEL
CONSUMPTION
1. ELECTRICITY
(a) Purchased
Units (M. KWH) 2354.76 2439.47 (84.71)
Total Amount
(Rs. Lakhs) # 70459.98 68626.30 1833.68
Average Rate/
Unit (Rs./KWH) 2.99 2.81 0.18
(b) Own
Generation
(i) Through
Diesel
Generator
Units (M. KWH) 15.45 12.86 2.59
Units per litre
of Diesel Oil
(KWH) 3.92 3.94 (0.02)
Average Cost/
Unit (Rs./KWH) 19.92 15.74 4.18
(ii) Through
Steam Turbine/
Generator
Units (M. KWH) 952.66 997.93 (45.27) Lower in-house power
Units per tonne generation due to planned
of Coal (KWH) 9103 6367 2736.88 shutdowns.
Average Cost/
Unit (Rs./KWH) 2.17 2.08 0.09
(* This includes
generation of
PH4 in M. KWH 204.78 312.89
which is operated
on by-product
gases upto 95%)
(iii) Through
TRT
Units (M. KWH) 140.28 109.73 Higher in-house power
Average Cost/ generation by Top
Unit (Rs./KWH) 2.00 2.00 recovery turbine.
2. COAL
(i) Coking Coal
& Cookeries
Quantity
(Million
Tonnes) 5.17 4.91 0.27 Increase in coke
Total cost production and increase
(Rs. Lakhs) 323002.24 281175.40 41826.84 in coal prices.
Average Rate
(Rs./Tonne) 6244.20 5731.88 512.32
(ii) Blast
Furnace
Injection
Coal
Quantity
(Million
Tonnes) 0.84 0.84 (0.01) Increase in imported coal
Total cost Price
(Rs. Lakhs) 82557.59 80499.94 2057.66
Average Rate
(Rs./Tonne) 9862.08 9546.96 315.12
(iii) Middling
Coal and ROM
Quantity
(Million
Tonnes) 0.10 0.13 (0.03) Higher Boiler efficiency
Total cost resulted in lower
(Rs. Lakhs) 1066.19 1398.91 (332.72) middling consumption
Average Rate
(Rs./Tonne) 1062.04 1067.51 (5.47)
3. FURNACE OIL
Quantity
(Kilo litres) 16225.92 14046.39 2179.53 Increase in consumption
Total Amount is mainly at Wires
(Rs. Lakhs) 4306.58 3251.10 1055.48 Division due to increased
Average Rate production at Tarapur
(Rs./KL) 26541.36 23145.44 3395.92 Plant
4. OTHERS
L.D.O.
Quantity
(Kilo litres) 4853.14 4915.52 (62.38)
Total cost
(Rs. Lakhs) 2262.67 1706.34 556.33 Increase in Diesel price
Average Rate
(Rs./KL) 46622.93 34713.39 11909.54
5. OTHERS
L.P.G.
Quantity
(Tonnes) 6576.22 4618.56 1957.66
Total cost
(Rs. Lakhs) 2720.59 1586.49 1134.10
Average Rate
(Rs/Tonnes) 41370.11 34350.32 7019.79
6. OTHERS
NG
Quantity
(Tonnes) - 782.25 (782.25) Borivali Wire Plant has
Total cost been closed w.e.f.
(Rs. Lakhs) - 93.49 (93.49) Aug' 99
Average Rate
(Rs./Tonnes) - 11951.42 (11951.42
7. OTHERS
HSD Oil
Quantity 58.85 46.94 11.91 100% straightening is
(Tonnes) being done with HSD
Total cost whereas in FY 10, a mix
(Rs. Lakhs) 23.78 16.05 7.73 of RPO and HSD was used.
Average Rate Further, increase in also
(Rs./Tonnes) 40411.94 34192.59 6219.35 due to drawing of 30%
more special grade steel
than FY 10.
# Excludes electricity duty paid on purchases.
Form for disclosure of particulars with respect to Conservation of Energy:
2009-10
B. CONSUMPTION PER UNIT OF PRODUCTION
Particulars A B C D E F G
Electricity (KWH) 356.00 113.00 0.41 3,614.14 570.74 113.00 222.14
389.98 117.00 0.61 3,653.06 485.12 124.27 223.83
Furnace Oil (Litres) - 11.31 6.37 29.40
- 14.52 6.22 28.37
Coking Coal (Tonnes) 0.61
0.62
Others:
Light Diesel Oil 0.63 - - 2.84
(Litres) 0.58 - - 5.24
High Speed Diesel 0.28
Oil (Litres) (0.17)
L.P.G. (kg) 13.50 20.67
13.09 13.42
NG (kg) -
19.06
A = Steel - (per tonne)
B = Tubes - (per tonne)
C = Bearings - (per no.)
D = F.A.M.D. - (per tonne)
E = Growth Shop - (per tonne)
F = CRC West - (per tonne)
G = Wire Div. - (per tonne)
Form - B
Form for disclosure of particulars with respect to Technology Absorption:
2010-11
Research and Development
1. Specific Areas in which R&D was carried out by the Company:
* Raw materials
* Cost and productivity
* Market and new products
* Energy and Environment
2. Benefits derived:
A novel process is developed for production of sponge chrome and chrome
nuggets. Sponge chrome will be used for production of ferrochrome in
existing Submerged Arc Furnace (SAF) process. It will reduce the power and
coke consumption by about 20% and increase the productivity of SAF. The
chrome nuggets will be directly used as alloying element in stainless steel
and alloy steel-making process. Both sponge chrome and chrome nuggets are
value added marketable products for FA & MD. The novel process uses non-
coking coal as a reducing agent and energy source and thereby reduces the
need of low ash, low phosphorus (imported) coke.
R&D has innovatively developed new agglomerates 'cold bonded chromite
pellets' for submerged arc furnace to produce ferrochrome which will reduce
70% energy in chromite pelletizing. These pellets exhibit superior
reduction characteristics as compared to sintered chromite pellets but
consume only 30% of the energy. The objective of the investigation was to
reduce energy consumption and CO2 emissions during chromite pelletizing and
ferrochrome production. Cold bonded chromite pellets, as compared to
conventional heat hardened pellets are estimated to decrease specific
energy consumption of chromite pelletizing by 70% and mitigate CO2
emissions by around 10,000 tons per annum. Chromium recovery is expected to
increase by 5-8% during ferrochrome production.
Tata Steel's R&D has taken initiative in the areas of clean environment by
using steel industry by-product. Coke oven effluents are highly polluted &
it is treated here in biological oxidation treatment plant (BOT) to
decrease the load of the pollutants and to meet the standards norms as per
pollution control board. But currently there is no sustainable colour
removal technology followed to remove the colour of BOT final discharge.
Concept of colour removal of BOT water by low cost absorbent materials
comes from the limitation of chemical processes. In a broad sense,
absorption process is practically possible through physio-chemical
absorption of colour matter present in the water body of BOT effluent.
However, the colour of water can be removed by the development of good
absorbent. The three main criteria for development of good adsorbent are:
1) ability of removal of more than 99% colour from effluent. 2) cost of
absorbent, 3) regeneration or reuse of the absorbent.
We explore that coke breeze is identified as such an adsorbent which
fulfils all of our requirements. The coke breeze is able to remove colour
more than 99% and also substantially reduce the chemical load by removing
toxic organic refractory materials like cyanide, thiocyanate and phenolic
compounds. The spent adsorbent can be well consumed by our sinter plant
itself.
The final aim of this work is to develop a low cost absorber from steel
industry by-product which can be reused by process of steel industry and to
obtain colour-free eco-friendly eco-friendly discharge water. Two novel
methods have been developed and demonstrated for complete removal of colour
from BOT effluent water before hypochlorite treatment as well as final
discharge. Moreover, substantial amount of cyanide and thiocyanate were
also removed from the effluent water which would lead to lower consumption
hypo-chlorite and sodium carbonate in the water treatment process. Finally,
the water so produced will be recycled in the plant leading to zero
discharge coke making process.
In FY 2010-11, the techno-economic feasibility of sponge chrome production
process was undertaken by a cross functional team consisting of members
from R&D, Ferro Alloys operations, marketing and business performance
enhancement group. As a result, the sponge chrome production idea having
Rs. 370 million EBITDA benefit potential (100 ktpa plant) was selected as
one of the key 'Shikhar' project for Ferro Alloys and Minerals Division.
The project will be under taken in two phases. In the first phase of the
project, a 10 ktpa sponge chrome production pilot plant will be built and
integrated with existing ferrochrome production process at FAP, Bamnipal
which will be up-scaled to full scale operation of 100 ktpa plant in second
phase of the project. The pilot plant will help to generate data for up-
scaling the process to full scale plant operation. For the 10 ktpa pilot
plant, the team has already completed the site selection and prefeasibility
activities with the help of Engineering Project Consultant. The
prefeasibility activities included preparation of conceptual process flow-
sheet, finalisation of technical specifications and key equipment designs
in process flow-sheet, estimation of project costs and interactions with
potential vendors for key equipments. The work is in progress to carry out
basic and detailed engineering of the proposed 10 ktpa pilot plant with the
help of Engineering Project Consultant. Presently, the team is focusing on
environment impact assessment (EIA) of the 10 ktpa pilot plant.
3. Future plan of action: Tata Steel's R&D recognises clean environment as
one of the biggest challenge and are determined to provide the solutions
and aimed at reducing CO2 emissions through the above mentioned programmes.
As part of the company's vision, the reduction in the emissions of Carbon-
di-oxide is attracting significant importance as a corporate strategy.
4. Expenditure on R&D: (Rs. crores)
(a) Capital 4.88
(b) Recurring 75.69
(c) Total 80.57
(d) Total R&D expenditure
as a % of total turnover 0.27%
Technology absorption, adaptation and innovation:
Efforts made on the Process Front:
Raw Materials & Iron Making
Sinter
* Use of three component flux in sintering (pyroxenite, limestone,
dolomite) - to fine tune sinter chemistry.
* Introduction of olivine sand as MgO flux in sinter - as preparation for
eventual discontinuation of pyroxenite Supply from Sukinda.
* Successful lab and production trials to improve the Granular index of
sinter mix (lime Slurry dosing).
* Lab trials to reduce the RDI of sinter (coating with Magnesium Chloride).
* Improvement in the use of nut coke (improving the CRI of coke by catalyst
dosing).
Coke:
* Establishing new coals - wider choice and cost optimisation.
* Empirical model for diagnosis of coke quality extended - also awarded ANQ
Congress award for paper based on this.
Blast Furnace:
* Lowered slag rate by 6 kg/thm despite working at higher coke ash and
alumina input - through slag regime adjustment.
* Replaced more than 15,000 tonnes of imported PCI coal by blending Jhama
from Jharia at 'G' Blast Furnace.
Beneficiation:
* I ntroduction of spargers for enabling finer bubbles in floatation -
separation efficiency improvement.
* Facilitation of testing flowsheet development for KBP coal project.
* Facilitation of testing flow sheet concept development for beneficiation
at Joda, Noamundi and Khondbond.
* Successful lab development of one chemical which functions as frother and
collector in flotation circuit of Jharia coal washery. It works well with
the 9th Seam i.e. higher product yield. Commercial trials are in progress.
Flat Product Product Development:
* Successful development of BH 220 grade for Tata Motors.
* Commercialisation for high tensile hot rolled HS 800 at Tata Motors.
* Successful commercialisation of C-Mn 440 and GA C Mn 440 grade at Nissan.
* Commercialisation for high tensile hot rolled HS 600 for Wheel
manufacturers.
* Approval from Hyundai for GA 440. Process Improvement:
* Improvement in prime yield of CRCA C Mn 440 grade (current yield about
82%).
* Debottlenecking of caster by moving grades out of peritectic range.
* Debottlenecking of the scarfing machine by removing L 1 slabs of EDD from
scarfing.
* Reduction in variation of Tensile strength in E 46 high tensile hot
rolled steel from 110 Mpa to 50 Mpa.
* I mprovement in camber rejection in Ashok Leyland by correction of
decambering process. Rework at the Customer end reduced by 6%.
* Reduction in defects such as Tiny RIS, Silicon scales, stickers etc.
* Establishing systems in line with TQM for activities such as Defect
control, NPD, CCMPetc.
Long Product & Global Wire
Product Development:
* Development & supply of welding grade wire rod (WR3M) that can draw at
50% higher speed (15-16 m/s against 10-12 m/s) to Lincoln, a welding
electrode manufacturer of international repute.
* Development and supply of High Carbon Wire rod to Wire division that can
draw at higher speeds (10 m/s against 6 m/s).
* Production and supply of high UTS/YS ratio rebars for nuclear application
to BARC.
Process Improvement:
* Installation of Cut and Bend Optimisation tools at Faridabad and
Bengaluru.
* I mprovement in die life at Wire Division with new die design.
* Initiation of a new idea construction design service to retail customers.
Technology Upgradation and Absorption in Tubes Division - 2009-10
In Tubes division, the following efforts are made to improve operational
efficiency.
ST Mills:
* Galvanising Bath #2 of ST Plant was modified to install inner diameter
(ID) air wiping facility in place of existing conventional steam blowing
system for reduction in overall zinc consumption.
Some Major New products Developed through new technology absorption:
* Development of thin organic coated (TOC) galvanised pipes .
* Development of 300x200 mm tubes for structural applications.
* Development and commercialisation of 14 new sizes of cold drawn tubes for
US Export market.
* Development of 76X4 mm CEW Propeller shaft tubes for Tata Motors.
* Development of 48.60*4.60 mm ERW tubes for head pipe application for M/s
Honda Motors Scooters India Ltd.
* Development of 42.70*3.50 mm soft drawn tubes for head pipe application
for M/s Bajaj Auto Ltd
* I mprovement in steel properties used for structural application
Efforts taken on Process Improvement at Bearings Division:
* Trials conducted and established for regular use of Super finishing
stones (Super Ceram ) for improved and consistent honing (Ra 0.03 microns)
in Plant 2.
* Developed Bore grinding wheels (Tyrolit) for Bore Dia. 10,12 and 15 mm
for better skip dress in Plant 1.
* Optimised Quill diameter in small Ball Bearing Bore grinding from 3.17 to
4.0 mm for improved rigidity and subsequently higher productivity and less
rejection Armature Specifications (hardness, composition, etc.) & Shore
hardness in rubber seals has been benchmarked & rationalised to resolve the
quality issues of Rubber seals.
Particulars of technology imported during last five years:
Steel Division Status of
Absorption Implementation
a) Supply of imported design and
drawing for 4th Stove of 'G' Blast
Furnace (Paul Wurth Italia, Italy) 2006 Commissioned
b) Supply of imported design and
drawing for 'H' Blast Furnace (Paul
Wurth Italia, Italy) 2006 Commissioned
c) Supply of imported design and
drawing for Sinter Plant No. 4
(Outokumpu Technology, Germany) 2006 Commissioned
d) Supply of imported design and
drawing for LD2 expansion project
(SMS Demag, Germany) 2006 Commissioned
e) Supply of imported design and
drawings for convertor gas cleaning
plants in LD shop 1 & 2 (SMS Demag,
Germany) 2006 Commissioned
f) Facility for quantitative
estimation of minerals through
Scanning Electron Microscope
(Intellection Pty. Ltd.,
Australia) 2006 Commissioned
g) Polarising Microscope with
Photometer and Imaging at R&D
(Leica Mikrosysteme Vertrieb
GmbH, Germany and PRESI S.A.,
France) 2006 Commissioned
h) Variable Frequency Drive for
Descaling Pump Motor at Hot
Strip Mill (ABB, India) 2007 Commissioned
i) Sinter Plant No. 4, having a
bed area of 204 sq. mtr. with ESP
having lesser emission of 50 mg/Nm3 2007 Commissioned
j) Double Jaw Eye Vertical Tong For
Batch Annealing Furnace at CRM 2007 Commissioned
k) SCADA System for Water Utilities 2007 Commissioned
l) Quantitative Estimation of
Minerals by SEM (Scanning Electron
Microscope) 2007 Commissioned
m) XRD (X-Ray Defraction) for
quantitative phase and texture
analysis 2007 Commissioned
n) Electric Blowers for 'H' Blast
Furnace 2009 Commissioned
o) Top Gas Recovery Turbine for 'H'
Blast Furnaces 2009 Commissioned
p) Flat Cast House Design for 'H'
Blast Furnace 2009 Commissioned
q) Internal Stoves for 'H' Blast
Furnace 2009 Commissioned
r) Use of mixed gas in place for CO
gas, for firing in 7th Lime Kiln 2009 Commissioned
s) New Billet Caster having all the
latest facilities and having 9 m
casting radius installed in an
existing building suitable for 6 m
casting radius, by going underground
and taking the pass line to (-) 3.3 m
level. 2009 Commissioned
t) Use of hydraulic mould occilator
and hydraulically operated turn over
cooling bed at CC 3 at LD Shop 1 2009 Commissioned
u) Robotised Sample Testing Laboratory
at LD Shop No. 1 2009 Commissioned
v) Top Gas Recovery Turbine for 'G'
Blast Furnace 2010 Commissioned
w) 4th Stove for 'G' Blast Furnace
to facilitate relining of other stoves,
without hampering hot metal production 2010 Commissioned
x) Continuous Emission Monitoring
stations at 4 locations inside Tata
Steel Works 2010 Commissioned
y) Installation of Roll Coating & Drying
System at Continuous Galvanising Line at
Cold Rolling Mill. 2011 Commissioned
z) Use of Blast Furnace Gas at New
Reheating Furnace using regenerative
burners at Hot Strip Mill 2011 Commissioned
aa) Installation of Chiller system
for maintaining temperature of cooling
medium for 'H' Blast Furnace Blower
Drives at Blower House No. 5 2011 Commissioned
Foreign Exchange earnings and outgo
a. Export performance:
1. Activities relating to exports:
Tata Steel sells its key products like HR, CR, Galvanised, Rebar, Wires,
Ferro Alloys & Minerals (FAM) in international market of strategic
importance viz., Middle East, South Africa, Japan, China, Korea, South East
Asia, Europe and SAARC countries. The key focus is to serve a wide range of
industries and to end customers with focus on high share of business. With
the help of Tata Steel International, we are having the synergy at the
group level and present a uniform face to the market through our global
commercial network.
2. Initiatives taken to increase exports during FY 11:
In view of robust domestic demand during the year, the opportunity for
exports has been limited for Flat and Long Products. However, there is a
growth of 76% in Wires and 43% in FAM business over last year.
Specific initiatives were taken in the area of enhancing customer
relationship, improved processes, new product, new market and channel
development, infrastructure development, new operating model etc.
Increased sales to neighbouring markets have resulted in higher revenues.
FAM Division received the prestigious EEPC (Engineering Export Promotion
Council) award for Star Performer in Large Enterprise category and also
received the CAPEXIL (Chemical and Allied Export Promotion Council of
India) award for excellence in Export performance.
FAM Division Celebrated 20 years of business relationship with JFE group
and Hitachi Metals.
3. Development of new export markets for products and services:
Flat Products: Developed High Strength Quality Galvanised Steels for
customers in Europe and Middle East. Established market for shipbuilding
grade with customers in Bangladesh. Obtained new approval for supply of
steel for skin panel and internal components from a leading automotive
customer in South East Asia. Made trial shipment of 'Galvano, (GP brand) in
South African market.
Long Products: Developed high End Wire Rod grade for Customers based in
Nepal. Established new market of Rebars to Bhutan.
Wires: Expanded presence in EU market and entered new markets like Saudi
Arabia and Nepal for Galvanised and Binding wires respectively. Re-entered
Australia and New Zealand for Galvanised wires.
Ferroy Alloys and Minerals: Strengthened multimode, multi port delivery
mechanism, introduced shipment through Inland Container Depot (ICD),
Durgapur, introduced split CONCOR rake for multiple destinations,
consistent container shipment from Paradip port.
4. Export plans:
Flat Products: Next year plan is to keep the volume at the similar level
and seed some new markets to cater from the new Thin Slab Caster (TSCR)
facilities.
Long Products: Near term plan is to maintain our presence with some key
relationship customers. Increase in exports is expected as and when planned
new capacities come-up for production in India.
Wires: Next year plan is to increase wires export by 50% over FY 11 by
exploring new markets.
FAM Division: Will focus on enriched product mix and increase its volume in
the higher realisations markets.
b. Total foreign exchange used and earned: This has been covered as a part
of the notes to the financial statements in this Annual Report.
Management Discussion and Analysis 2010-11
INDUSTRY STRUCTURE:
Global Steel industry: Global crude steel production reached a new height
during 2010 at 1,414 million metric tonnes, up by 15% over 2009. While
China maintained the lead position in terms of volume of steel produced,
with a growth of 9.3%, most of the negative growths seen in the steel
producing nations hit by the economic downturn in 2009 reversed during 2010
and they recorded positive double digit growths during the year. The
following table shows the crude steel production volume of the top ten
steel producing nations:
Figures in million tonnes
Rank Country 2010 2009 Change %
1 China 626.7 573.6 9.3%
2 Japan 109.6 87.5 25.2%
3 United States 80.6 58.2 38.5%
4 Russia 67.0 60.0 11.7%
5 India 66.8 62.8 6.4%
6 South Korea 58.5 48.6 20.3%
7 Germany 43.8 32.7 34.1%
8 Ukraine 33.6 29.9 12.4%
9 Brazil 32.8 26.5 23.8%
10 Turkey 29.0 25.3 14.6%
Source: World Steel Association
In Asia, the annual production at 897.9 million tonnes in 2010 was up by
11.6% from 2009. The EU registered a growth of 24.5% over 2009 producing
172.9 million tonnes of crude steel in 2010. However, production in the UK
(2010: 9.7 million tonnes, 2009: 10.1 million tonnes) and Greece (2010: 1.8
million tonnes, 2009: 2.0 million tonnes) continued to decline over
previous years. The CIS countries recorded increase of 11.2% with a
production volume of 108.5 million tonnes of crude steel in 2010 with
Russia and Ukraine as the major contributors.
In 2010, Tata Steel ranks 11th among the top 12 steel makers of the world
in terms of crude steel production. Most of the international steel
companies witnessed a bounce back in their production level from the drops
they experienced from the crisis of 2009. However, in many cases these
companies could not reach their pre-crisis production levels. Chinese
companies dominate the list with 7 of the top 12 being Chinese companies.
The largest gainers in terms of percentage increase over 2009 production
were ThyssenKrupp (52%), US Steel (46%), Nippon Steel, JFE, Nucor and
Gerdau (all registering more than 30% increase).
2010 2009
Crude Crude Change
Company Steel Rank Steel Rank %
Output Output
Arcelor Mittal 90.6 1 73.2 1 23.8%
Hebei Iron & 52.9 2 49.7 2 6.4%
Steel
BaoSteel 44.5 3 38.9 3 14.4%
Angang Group 40.3 4 37.4 4 7.8%
Wuhan Iron & 36.5 5 30.3 6 20.5%
Steel
Posco 35.4 6 31.1 5 13.8%
Nippon Steel 34.5 7 26.5 7 30.2%
JFE 31.1 8 23.8 9 30.7%
Jiangsu Shagang 30.1 9 26.4 8 14.0%
Shougang 25.8 10 19.5 12 32.3%
Tata Steel 23.5 11 21.9 10 7.3%
Shandong Iron & 23.2 12 21.3 11 8.9%
Steel
Source: Steel Business Briefing
The Japanese crisis in March 2011 has caused some uncertainty over raw
material prices and short-term end-user steel demand, although there is
likely to be a medium-term increase in demand from reconstruction activity.
In particular, the automotive and electronics industries may face shortages
in supply where they are relying on Japan for manufacturing components.
Steel Industry in India: The trend of crude steel production in India.
Ranked 5th in terms of crude steel production in the steel producing
countries, the country's production grew by around 6% in 2010 over 2009.
There has been a diversification in the product mix of the steel industry
in India to include sophisticated value-added steel used in the automotive
sector, heavy machinery and physical infrastructure. However, the industry
is suffering from high ash content of domestic coal and is dependent on
supply of imported coal. The bottlenecks for green field expansion of the
country are raw material security (getting iron ore mining lease),
infrastructure (affecting logistics and transport), and uncertainties in
land acquisition. The production of flat products and long products of
major Indian companies is estimated to have grown by around 12% and 8%
respectively during the financial year 2010-11 when compared with the
previous financial year. Steel consumption for FY 2010-11 for the flat
products and long products grew by 6.7% and 10.6% respectively with flat
products exports growing by 1.8%, while there was a decline of 33.7% in the
exports of long products. There was a reduction in the imports of flat
products and long products by 3.8% and 23.6% respectively. The steel prices
during the financial year 2010-11 have increased from the average prices
prevailing in the previous financial year as well as the quarter ended
March 2010 driven primarily by the increase in the prices of input raw
materials during the same period.
UK and European Steel Industry: Consequent to the collapse in demand in
2009, the crude steel production in the European Union (27) increased by
24.5% from 138.8 million tonnes in 2009 to 172.9 million tonnes in 2010.
Imports of steel by EU were higher by 27% from 22 million tonnes in 2009 to
27.9 million tonnes in 2010. Russia remained the largest supplier of steel
(24%) to the EU at 6.8 million tonnes, while 20% of the imports were from
Ukraine (5.6 million tonnes) and imports from China were 3.9 million tonnes
(14%). The product mix in the imports changed with more of flat products as
compared to long products. EU exports however increased by 8.4% to 34.3
million tonnes with Turkey being the largest market (4.5 million tonnes -
13%) followed by the USA (3.7 million tonnes -11%) and Algeria (3 million
tonnes - 8%). South-East Asian Steel industry: As per the preliminary
numbers obtained by South East Asia Iron & Steel Institute (SEAISI), the
steel consumption in the Association of SouthEast Asian Nations (ASEAN) at
47.3 million tonnes in 2010 grew by 14% over 2009 and was higher by 1.3
million tonnes over the pre-crisis level of 2008. While production in the
area at 26 million tonnes was higher than 2009 by 6%, imports grew
significantly by 25% over 2009 to be at around 30 million tonnes. Exports
volume at 8 million tonnes also witnessed an increase of 26% over 2009.
The apparent steel consumption (in million tonnes) in the ASEAN is shown
below:
2010 2009 Change%
Thailand 14.01 10.75 30.3%
Indonesia 9.44 7.42 27.2%
Philippines 3.79 3.52 7.7%
Malaysia 7.14 6.65 7.4%
Vietnam 10.28 10.47 (1.8%)
Singapore 2.64 2.80 (5.7%)
Total 47.30 41.61 13.7%
In Thailand, the increase in consumption was met by 60% higher imports (8
million tonnes) while the domestic steel output grew moderately by 8% to
around 7.5 million tonnes with exports increasing by 0.4 million tonnes to
1.6 million tonnes. The Steel demand in Indonesia was met substantially by
imports with domestic output at 5.1 million tonnes and exports rising by
22% to be at 1.3 million tonnes. Philippines demand growth was met mostly
by imports (1.8 million tonnes) with stagnation in the domestic output and
decline in exports. Similar situation was witnessed in Malaysia with an
increase in imports (at 4 million tonnes) and decline in domestic
production and exports. Vietnam steel demand declined by 1.8% in contrast
to growth in the domestic output by 20% to 5.6 million tonnes to serve the
export market. In Singapore, long product consumption declined by 4% from
1.83 million tonnes to 1.75 million tonnes mainly on account of completion
of mega projects. In spite of a drop in the domestic long product output of
the country, NatSteel managed a growth of 9% catering to exports market
which grew from 0.29 million tonnes to 0.49 million tonnes. Flat product
demand in Singapore fell by 6% to below 0.9 million tonnes.
TATA STEEL GROUP OPERATIONS:
Tata Steel Group deliveries in FY 11 at 23.5 million tonnes were almost at
par with the previous year (23.6 million tonnes). The turnover for the
Group at Rs.118,753 crores during FY 11 was 16% higher than the turnover of
FY 10 (Rs.102,393 crores) primarily due to higher prices across the Group.
EBITDA for the Group in the financial year 2010-11 was Rs.17,103 crores as
compared to Rs.9,340 crores of FY 10.
FY 11 EBITDA includes profit on sale of shares of Tata Power and Tata
Motors by Tata Steel India, profit on sale of Southern Steel Berhard by
NatSteel, partly offset by write-off of unamortised fees of old senior
facility agreement at Tata Steel Europe which was repaid in October 2010
following refinancing of loans. Similarly, in FY 10 EBITDA included profit
on sale of shares by Tata Steel India and Kalimati Investments, profit on
sale of Aluminium Smelter and other investments by Tata Steel Europe,
partly offset by CARS restructuring expenses at Tata Steel India. Excluding
these items in both the years, the Group EBITDA doubled at Rs.16,859 crores
when compared to Rs.8,447 crores in FY 10.
The Group turned around with a profit after taxes (after minority interest
and share of profit of associates) of 78,983 crores during FY 11 after
registering a loss ofRs.2,009 crores in FY 10.
Tata Steel India:
Figures in Rs. crores
2010-11 2009-10
Turnover 29,396 25,022
Profit before tax (PBT) 9,777 7,214
Profit after tax (PAT) 6,866 5,047
1. Steel division:
The production and sales figures of the Steel division of the Company are
shown in the following table:
Figures in million tonnes
FY 11 FY 10 Change %
Hot Metal 7.50 7.23 3.8%
Crude Steel 6.86 6.56 4.4%
Saleable Steel 6.69 6.44 3.9%
Sales 6.41 6.17 4.0%
The major production and sales highlights for the financial year 2010-11
are shown below:
Production: Key highlights of the production performances of various units
in the Steel Works are shown below:
Figures in million tonnes
Best ever FY'11 Previous best
'G' Blast Hotdmetal 2.11 2.09 - FY 10
Furnace production
LD:shxp #2 & Slab production 3.80 3.70 - FY 10
Slab Caster
LD shop #1 Billet production 3.05 2.86 - FY 10
Hot Strip Mill Production 3.73 3.65 - FY 10
New Bar Mill Production 0.72 0.67 - FY 10
Merchant Mill Production 0.37 0.34 - FY 10
West Bokaro Production 2.20 2.15 - FY 10
(clean coal)
OMQ Production 13.09 12.04 - FY 10
Production in the Blast Furnaces was maximised by producing from bigger
blast furnaces with higher productivity while in the two steel melting
shops there was an increase in the vessel life and heat size which enhanced
productivity.
The crude steel production exceeded the name plate capacity of 6.8 mtpa
project in the 2nd year after commissioning of the Project.
The special improvement initiative'Kar Vijay Har Shikhar'launched with a
view to improve profitability, has yielded some quick results in the area
of LD#1 reliability, and throughput improvement at West Bokaro besides
improvements in Ferro Alloys & Minerals Division, iron ore mines etc.
Sales
* Overall sales at 6.42 million tonnes grew by 4% over last year (6.17
million tonnes in FY 10).
* Due date performance (which measures delivery compliance) improved
significantly from 93% to 96% in flat products and from 87% to 91% in long
products.
Flat Products
* The sales of flat products at 3.54 million tonnes increased by 2% in FY
11 (3.47 million tonnes in FY 10).
* The division crossed 1 million tonnes flat products sales to automotive
segment (1.042 mt) and for the Branded Products (1.054 mt). The division
also achieved the best ever sales performance in Skin Panel (0.49 mt) and
Galvanised Annealed (0.83 mt).
Long Products
* Sales of Long products at 2.88 million tonnes increased by 7 % in FY 11
(2.70 million tonnes in FY 10).
* The division achieved best ever TISCON sales of 1.82 mt in FY 11 against
the previous best of 1.57 mt in FY 10 thus becoming the market leader in
retail sector of rebar.
2. Ferro Alloys & Minerals division:
The trend of production and sales volume of Ferro Alloys & Minerals
Division.
Total sales volume in FY 11 was 1464k tonnes against 1508k tonnes of FY 10.
While ferro alloys sales including minerals registered an increase of 8%
during FY 11 (848 k tonnes) over FY 10 (788 k tonnes), flux sales declined
by 15% in FY 11 over FY 10. (FY 11: 613k tonnes ; FY 10: 719k tonnes). FY
11 saw a recovery, post the downturn in the FY 09 and the recession in the
FY 10. Infrastructural investments in Asia (primarily in China, Korea,
Taiwan, India & Japan) and increased automotive production in Asia & US
resulted in improvement in the demand for steel and stainless steel. Global
stainless steel production grew 25% in 2010 causing a rise in the demand
for ferro alloys (Manganese Alloys: 14%, Chrome Alloys: 22%). Growth of
Chrome Alloys is expected to slow down in FY 12 post tsunami in Japan
(significant market for Ferro Chrome). Ferro alloys demand is likely to
remain firm in other parts of the world and Asia (China, Korea, Taiwan). In
Manganese Alloys, the division achieved almost 100% share in supplies of
Manganese alloys to the Group's Asian operations. However, the production
of Ferro Manganese was lower due to power restrictions.
The division was honoured with the CAPEXIL (Chemical and Allied Export
Promotion Council of India) and EEPC (Engineering Export Promotion Council)
awards for its export performance in the recent years.
3. Tubes division:
The trend of production and sales volume of Tubes Division.
During FY 11, Tubes Division consolidated its position in the market place
by registering a growth in production and sales by 6% and 5% respectively
enabled by successful implementation of various improvement initiatives,
under 'Kar Vijay Har Shikhar'. The key performance highlights of the
division are appended below:
* 'Tata Pipes' continues to be one of the leading players in India in the
conveyance business for the plumbing and irrigation segments. During FY 11
it has also made forays in the HVAC (Heating, Ventilating and Air-
conditioning) segment and provided value added services through its channel
partners.
* 'Tata Structura' is supplied to the infrastructure segment. This sector
grew by 15% in FY 11 achieving a landmark of 0.1 million tonnes with its
presence in the upcoming airports of Chennai and Kolkata.
* Precision Tubes are supplied to the Automotive, Process and Power sector.
During FY 11, the production and sales of Precision Tubes grew by 13% each
over the previous year using future focussed practices like EVI (Early
Vendor Involvement), NPD (New product Development) and PAG (Product
Application Group).
The Tubes Division won the Coveted JRD QV Award in the year. Along with
long products, the division also won the EPC World Award 2010.
4. Bearings division:
The performance of Bearings division in terms of production and sales
volume.
The division has posted a growth of 12% and 4% in production and sales in
FY 11 over FY 10 respectively driven primarily by the demand in the
domestic automotive segment.
The division adopted various improvement initiatives like TOC (Theory of
Constraints) and took the next step in the TPM (Total Productivity
Maintenance) activities. Cross-functional teams are working to challenge
costs, increase throughput and productivity.
During FY 11, the division was bestowed with number of accolades from its
customers like Bajaj Auto, Toyota Kirloskar Motors Ltd., Tata Motors etc.
Tata Steel Europe (TSE): Figures in Rs. crores
FY 11 FY 10
Turnover 75,991 65,843
Profit before tax (PBT) 1,751 (7,712)
Profit after tax (PAT) 1,666 (7,504)
Tata Steel Europe produces carbon steel by the basic oxygen steelmaking
method at two integrated steelworks in the UK at Port Talbot and
Scunthorpe, and at one in the Netherlands at IJmuiden. Engineering steels
are produced in the UK at Rotherham using the electric arc furnace method.
A number of rolling mills and process lines at TSE are on the same sites as
the steelworks, but most of the operating sites do not have steelmaking
facilities.
TSE has sales offices, stockholders, service centres and joint venture or
associate arrangements in a number of markets for distribution and further
processing of steel products supported by various agency agreements. There
is an extensive network in the EU while outside the EU, the company has
sales offices in over thirty countries, supported by a worldwide trading
network. Principal end markets for TSE's steel products are the
construction, automotive, packaging, lifting and excavating, energy and
power and rail sectors.
During the financial year under review, TSE adopted a new operating model
consisting of:
Steelmaking operational Strip Products Mainland
hubs Europe
Strip Products UK
Long products Europe
Speciality Businesses Colours
Building Systems
Packaging
Tubes
Kalzip
Plating
Cogent Power
Speciality Steel
Distribution and Sales Distribution UK and Ireland
network Distribution Europe
International
The earlier model of operations had three main operating divisions; Strip
Products, Long Products and Distribution & Building Systems. TSE has
adopted single sales and marketing function focussing on eight different
industries as markets. The EU, is the most important market for the TSE
Group, accounting for 84% of its total turnover in the financial year 2010-
11. TSE has adopted the Tata Steel identity for trading purposes with
effect from September 2010 and a progressive rebranding process is under
way. Teesside Cast Products unit was mothballed at the end of February 2010
and has since been disposed off in March 2011. Crude steel production for
TSE at 14.6 million tonnes in FY 2010-11 was almost at par with the
previous year while the deliveries at 14.9 million tonnes in FY 2010-11 was
higher by 3% over FY 2009-10. The production and sales performance of TSE
are shown below:
Figures in million tonnes
FY 11 FY 10 Change %
Crude steel production 14.6 14.4 1%
Deliveries 14.9 14.4 3%
In the financial year 2010-11, about 70% of TSE's crude steel production
was rolled into hot rolled coils. The company also manufactured sections,
plates, speciality steels and wire rods apart from selling semi-finished
products. Approximately 20% of hot rolled coils manufactured were sold in
the market without further processing and approximately 60% was further
processed in cold rolling mills and coating lines, apart from using them in
tube mills for the manufacture of welded tubes. Crude steel production at
different facilities in TSE along with their capacity is shown below:
Figures in million tonnes
Production Actual
capacity production
Port Talbot steelworks, West 4.9 3.8
Glamorgan, Wales
Scunthorpe steelworks, 4.5 3.4
South Humberside, England
Rotherham steelworks, South
Yorkshire, England 1.3 0.6
IJmuiden steelworks, the 7.7 6.8
Netherlands
Total 18.4 14.6
Excluding seasonal effects, sales volumes of TSE were reasonably flat for
the first three quarters of FY 2010-11, before showing an improvement in
the fourth quarter to the highest level of quarterly sales since FY 2008-
09. The deliveries of the various divisions of TSE are shown in the
following table:
Figures in million tonnes
FY 11 FY 10 Change %
Strip Products 3.28 3.01 9%
Mainland Europe
Strip Products UK 1.19 1.15 3%
Long Products Europe 2.79 3.49 (20%)
Speciality Steel 3.68 3.29 12%
Nistrioution & Sales 3.93 3.48 13%
Network
Total 14.87 14.42 3%
NatSteel Holdings: Figures in Rs. crores
FY 11 FY 10
Turnover 7,413 6,254
Profit before tax (PBT) 143 75
Profit after tax (PAT) 152 102
The key geographies of NatSteel's business are Singapore, China, Australia,
Vietnam, Malaysia, Thailand and the Philippines. Most of the economies have
done well coming out of the global financial crisis and the prognosis going
forward is quite encouraging for the year. During the financial year under
review production at 1.585 million tonnes was almost at par with the
previous year (1.595 million tonnes). Sales volume increased from 1.78
million tonnes in FY 10 to 1.80 million tonnes in FY 11. The performance of
the major business operations of the company are discussed below.
The Singapore operations are EAF (Electric Arc Furnace)-based steelmaking
and rolling operations with a production capacity of about 750 k tonnes per
annum. During the financial year 200910, sales of the Singapore operations
at 844k tonnes were 14% higher than that of last year and contributed most
to the increase in profits of the company.
NatSteel Xiamen, the Chinese subsidiary of NatSteel sold 495 k tonnes of
rolled products during FY 2010-11, volumes being lower than last year by 37
k tonnes. However, there was improvement in margin as cost increases were
contained within the increase in prices and resulted in higher overall
margin against last year. Sales Volume in SIW Thailand, NatSteel Australia
and Best Bar Australia during the financial year 2010-11 at 179 k tonnes,
57 k tonnes and 106k tonnes increased by 27 k tonnes, 15 k tonnes and 20 k
tonnes respectively over the financial year 2009-10. Sales in Vina
(Vietnam) and Wuxi (China) units at 125 k tonnes and 71 k tonnes during the
financial year under review were lower than the previous year by12 k tonnes
each. Price increases in these units improved (other than the Australian
units where prices deteriorated) but the cost increases more than offset
the price increases and resulted in lower margins.
Tata Steel Thailand (TSTH): Figures in Rs. crores
FY 11 FY 10
Turnover 3,911 3,157
Profit/(loss) before tax (151) (9)
Profit/(loss) after tax (139) (11)
TSTH recorded billet production of 1.30 million tonnes during the financial
year 2010-11 registering an increase of 10% over the financial year 2009-10
(1.18 million tonnes). Finished goods production at 1.28 million tonnes
during the financial year 2010-11 increased by 6% over the financial year
2009-10 (1.20 million tonnes). Sales volume at 1.29 million tonnes during
the financial year 2010-11 was higher by 8% as compared to financial year
2009-10 (1.19 million tonnes) with 7% and 13% growth in the company's
domestic sales and exports volume. However, low capacity utilisation during
the year, losses due to mothballing of Mini Blast Furnace during part of
the year, steep increase in raw material prices leading to high metallic
input costs, and resulted in an increased overall loss during FY 2010-11
for the company. Tata Metaliks Limited:
Figures in Rs. crores
FY 11 FY 10
Turnover 1,347 1,068
Profit/(loss) before tax (15) 17
Profit/(loss) after tax 1 29
Tata Metaliks Limited (TML) a subsidiary of Tata Steel Limited, is a
leading producer of Foundry Grade Pig Iron in India with plants in
Kharagpur (West Bengal) and Redi (Maharashtra) with a total capacity of 6.5
lac tonnes per annum. Tata Metaliks Kubota Pipes Limited (TMKPL) engaged in
the manufacturing of DI (Ductile Iron) Pipe, is a subsidiary of Tata
Metaliks Limited with a total capacity of 1.10 lac tonnes per annum. The
production and sales for the financial year 2010-11 and 2009-10 are shown
below:
2010-11 2009-10
Production '000 tonnes '000 tonnes
Pig Iron 477 492
Ductile Iron Pipe 20 4
Sales:
Pig Iron 473 484
Ductile Iron Pipe 19 3
During the financial year under review, lower production and unfavourable
market resulted in lower sales volume. Although turnover improved driven by
25% increase in average realisations, higher raw material costs more than
offset the increase in realisations lowering the margins. Profit made by
the standalone entity was almost offset by losses incurred by the
subsidiary TMKPL. TML is striving to improve its operating margin by
setting up Sinter Plant at Kharagpur, upgrading the Blast Furnace
increasing the working volume. The capacity of the Kharagpur plant would be
increased to 407 k tonnes. The company is also setting up Coke Oven plant
in both locations at Kharagpur and Redi on BOOT (Built Operate Own &
Transfer) basis.
TM International Logistics Limited:
Figures in Rs. crores
FY 11 FY 10
Turnover 978 612
Profit before tax (PBT) 72 45
Profit after tax (PAT) 57 37
TM International Logistics Limited (TMILL) and its subsidiaries offer
logistic services pertaining to port and terminal handling, maritime
shipping, ship agency, custom clearance and freight forwarding.
The company is involved in the activity of handling port operations at
Haldia and Paradip on the east coast of India backed by fully dedicated
customs clearance and shipping agency services at both the ports. It runs a
clean cargo terminal at berth number 12 at Haldia, which is equipped with
modern handling facilities including heavy equipments, shore cranes and
vast open storage area as well as covered warehousing facilities. The
shipping business of TMILL offers integrated solutions to customers by
packaging Ocean freighting with other auxiliary services like transloading
and barging for draft-restricted ports or with port handling and ship
agency services. The Freight Forwarding arm of TMILL is in the business of
facilitating global trade by being an intermediary between cargo carriers
and suppliers/buyers.
Going beyond its traditional domain, TMILL has now ventured into providing
marine services and is acting as the operation and maintenance operator to
the port of Dhamra. During FY 11 there was a significant jump in the
turnover and profit of the company due to increase in the volumes handled
by the shipping business, increased tariff rate at Paradip Port, higher
handling of cargo increasing the revenues of the CHA & Inland logistics,
more TEUs (Twenty tonne equivalent units) handled by the freight forwarding
business.
The key performance highlights of the company during the financial year
2010-11 are the following:
Division FY 11 FY 10 Change %
Port Milliton 7.8 8.0 (2.5%)
operations tonnes
Shipping Million 5.2 3.3 58%
tonnes
CHA & Inland CIF in 6,094 3,334 83%
Logistics Rs. crores
Freight Volume 28,240 21,801 30%
forwarding in TEUs
Tayo Rolls Limited: Figures in Rs. crores
FY 11 FY 10
Turnover 133 132
Profit before tax (PBT) (30) (12)
Profit after tax (PAT) (30) (12)
Tayo Rolls Limited, a subsidiary ofTata Steel Limited, is a leading roll
manufacturer in India, promoted by Tata Steel Limited, Yodogawa Steel
Works, Japan and Sojitz Corporation Japan in 1968. The rolls industry
suffered due to poor offtake from the steel industry during the downturn in
FY 10. The inventories are now reaching the reordering level and the
deliveries are expected to pick up in FY 12. During the year under review
the company has started to supply high-end Rolls in the form of Super Ni-
Grain (SNG) rolls to its few customers. Other high end rolls like highspeed
and semi high-speed rolls are on the anvil for supply to the customer.
The key highlights during the year is shown below:
Figures in k tonnes
FY 11 FY 10 Change %
Rolls Production 7.2 6.4 13%
Rolls Sales 7.5 6.5 15%
Pig Iron Production 10.7 25.9 (59%)
Pig Iron Sales 8.1 19.6 (59%)
Ingot production 2.4 - -
Ingot Sales 1.6 - -
Rolls production and sales increased over the previous year due to better
demand and during FY 11 commercial production of ingots was started in
November 2010. The pig iron production was suspended from August 2010 as it
was not economically viable to produce pig iron from the Mini Blast Furnace
owing to high cost of inputs and sluggish casting market affecting the pig
iron off-take thereby increasing the losses during the year.
Tata Steel Processing & Distribution Limited:
Figures in Rs. crores
FY 11 FY 10
Turnover 1,592 1,261
Profit before tax (PBT) 63 52
Profit after tax (PAT) 43 32
Till Q1FY 10, TSPDL (erstwhile Tata Ryerson) was a Joint venture with Tata
Steel's share being 50%. Accordingly only 50% of Q1FY 10's numbers were
considered for financial consolidation.
Tata Steel Processing and Distribution Limited (TSPDL) is the leading steel
service centre in India with a steel processing capacity of around 2
million tonnes and 5 steel processing centres across the country.
During the last three financial years, the company has diversified its
business portfolio by entering into the high value-added business of
manufacturing of auto components for Auto Majors like Caterpillar and Tata
Motors through its commissioned facility at Tada, Andhra Pradesh and
Pantnagar, Uttarakhand respectively.
During the financial year 2010-11, the company recorded an all-time high
tolling and distribution production volume of 1.458 million tonnes as
compared to 1.346 million tonnes in the previous year. Higher volumes,
increase in average revenue per tonne more than made good the increase in
input costs and other increases in expenditure and helped the company post
the highest profit before tax in its history of operations. Different units
of the company received reputable accolades notable amongst which are:
* Pantnagar Unit won the Northern Region Tata Innovista Award.
* Tada Unit was re-certified for the prestigious SQEP certification by
Caterpillar.
* The Pune Unit received certification of OHSAS 18001 and EMS 14001:2004.
* The Jamshedpur Unit got recertified for TS 16949 and OHSAS 18001.
* The Faridabad Unit facilitated Tata Steel to get 'Best Supplier Award'
from Maruti.
Safety has remained a primary area of attention and by following Du Pont
Safety initiatives, the company achieved a 77% reduction in injury and a
58% reduction in LTIFR compared to the financial year 2009-10.
Tinplate Company of India Limited: (An associate company of Tata Steel)
Figures in Rs. crores
FY 11 FY 10
Turnover 810 792
Profit before tax (PBT) 51 102
Profit after tax (PAT) 36 67
The Tinplate Company of India Limited (TCIL) is a leading indigenous
producer of tin coated and tin free steel sheets in India manufacturing
various grades of electrolytic tinplates (ETP) and tin-free steel (TFS)
sheets used for metal packaging. TCIL has also been 'value-adding' its
ETP/TFS products by way of a providing printing and lacquering facility to
reach closer to food processors / fillers.
During the year FY11 the production of 241 k tonnes was 6% higher as
compared to 227 k tonnes in FY10. The Company is presently in the midst of
setting up a Cold Rolling Mill to produce the feedstock required for full
utilisation of its tinning lines. Better demand supported by higher
producing capacity augmented in ETL-2 line helped the company achieve
higher sales and production volumes with an increase in capacity
utilisation from 60% in FY 10 to 64% in FY 11. However the profits declined
as compared to the previous year the primary factor being steep increase in
input steel and tin prices which more than offset the increase in revenues.
With effect from 1st April, 2011, TCIL became a subsidiary of Tata Steel
Limited consequent upon the automatic and compulsory conversion of the 3%
Fully Convertible Debentures (which were issued in September 2009) into
Equity Shares. Tata NYK Shipping Pte Limited:
Figures in Rs. crores
FY 11 FY 10
Turnover 660 703
Profit before tax (PBT) 3 (6)
Profit after tax (PAT) 3 (6)
Tata NYK Shipping Pte Ltd., a 50:50 joint venture between Tata Steel Ltd.,
India and NYK Line, a Japanese shipping major has been incorporated to meet
the growing sea-borne trade for the Tata group and the Indian markets.
The company is primarily into the business of owning, operating and
chartering of ships to carry dry bulk and break bulk cargo including coal,
iron ore, limestone & steel products. Since four years of its inception,
the company has grown its fleet from only 2 ships in 2007 to a current
fleet size of 14 ships (2 owned and 12 chartered).
The company has a diversified fleet ranging from Supramax (56,000 DWT),
Panamax (75,000 DWT) & Capesize (180,000 DWT) vessels. The vessels are
deployed for the Tata Group and Indian dry bulk cargo based on the
available port facilities and cargo requirements across geographies.
Cargo handled increased from 6.79 million tonnes in FY 10 to 7.85 million
tonnes in FY 11 with increase in number of shipments from 110 to 119.
However, due to expiry / deferment of certain cape contracts with higher
per day charter base the turnover declined over the previous year. During
the financial year addition of a second own vessel in the fleet
significantly improved the operating margins and the profits of the
business as compared to a loss in the previous year. Tata Refractories
Limited:
Figures in Rs. crores
FY 11 FY 10
Turnover 926 899
Profit before tax (PBT) 67 63
Profit after tax (PAT) 44 42
Tata Refractories Ltd. (TRL) is India's leading Refractories producer,
producing a full range of refractories with a service backup for total
refractory solutions. TRL China Limited, a subsidiary of the company has
completed third phase of expansion during the current financial year, which
has increased its capacity from 54,000 tonnes per annum to 90,000 tonnes
per annum. With the wide range of refractory products TRL has been meeting
the growing needs of various industries like Steel, Cement, Glass, Copper,
Zinc, Aluminium, Petro-Chemical etc.
During FY 11, production was lower by 8% from 295k tonnes during FY 10 to
272 k tonnes during FY 11. Sales were lower by 3% from 351k tonnes during
FY 10 to 342k tonnes in FY 11. Despite lower sales volume, revenue was
higher mainly due to higher average realisations and better product mix.
The profits increased slightly over FY 10 as the revenue increases were
almost offset by cost increases on account of increase in input material
and power costs and effect of lower volumes.
Tata Steel and Krosaki Harima Corporation (KHC), an associate of Nippon
Steel Corporation of Japan have signed definitive agreements on 21st April,
2011 to induct KHC as a strategic partner in Tata Refractories Limited
(TRL). Under this arrangement, KHC will acquire 51% equity stake out of
Tata Steel's current 77.46% stake in TRL.
Tata Sponge Iron Limited:
Figures in Rs. crores
FY 11 FY 10
Turnover 683 534
Profit before tax (PBT) 150 126
Profit after tax (PAT) 101 85
Tata Sponge Iron Limited, a manufacturer of sponge iron and producer of
power is located at Joda, Odisha. During the financial year 2010-11, the
Company achieved record production of 383 k tonnes of Sponge Iron as
compared to 359 k tonnes in the previous year, registering a growth of 7%.
The capacity utilisation during 2010-11 zoomed upto 98% as compared to 92%
in the previous year. The Company also achieved record sales of 380 k
tonnes as against 361 k tonnes in the previous year, thus growing by 5%.
In the power business, the Company achieved a generation of 191.39 million
kwh of power in FY 2010-11 as compared to 181.39 million kwh in FY 2009-10.
The sale of surplus power during the FY 2010-11 was 133.77 million kwh
against with 125.01 million kwh sold in the previous year.
The increase in turnover during 2010-11 is mainly due to increase in prices
of Sponge Iron along with increases in volumes. These increases were partly
offset by increases in higher costs with imported coal mix being higher in
order to improve the specific consumption of coal.
Tata Steel KZN Pte Limited:
Figures in Rs. crores
FY 11 FY 10
Turnover 597 522
Profit before tax (PBT) (55) 43
Profit after tax (PAT) (55) 43
Tata Steel KZN, located at Richards Bay on the KwaZulu-Natal coast of South
Africa, is in the business of making high carbon ferrochrome. During the
financial year 2010-11, production volume at 107 k tonnes decreased by 9%
as compared to 118 k tonnes registered during FY 2009-10 as the furnaces
were shut for 1.5 months during the high cost electricity period. The sales
were lower by 9% from 129 k tonnes in FY 2009-10 to 117 k tonnes in FY
2010-11. Prices improved over the previous year but high raw material
costs, steep increase in electricity costs, lower volumes resulted in
losses during FY 11 in contrast to the profits earned during FY 10.
The operational highlights of the company during the year were the
following:
* Improved furnace performance and efficiencies towards the latter part of
the year due to the utilisation of better quality ore and pellets
* Improved furnace and gas plant availability due to preventative
maintenance system implementation
* Elimination of the backlog untreated slag and satisfactory performance of
the metal recovery plant
* Successful completion of the two major capital projects on time and below
budget
* Very positive safety performance and major strides taken in anticipation
of the first ISO audits to be conducted in the new financial year
STRATEGY:
Tata Steel Group remains committed to its vision of being a global
benchmark in value creation and corporate citizenship despite the
challenges of a slow European recovery, high raw material cost and the
looming introduction of EU ETS (Phase III). In line with the vision, the
Group's strategy is focused on value creation with the pillars of quality
of earnings and growth. Quality of earnings:
Tata Steel in India continues to be one of the most profitable steel
operations in the world. It has several continuous improvement initiatives
in place. Cumulative cost savings of 71,061 crores was achieved during the
last financial year with areas such as slag rate reduction, raw material
optimisation and shared services being addressed.
'Kar Vijay Har Shikhar' ('conquer every peak') is a new initiative launched
during the year, focused on Tata Steel's aspiration to improve its EBITDA.
It is a multi-unit, multi-location, cross functional improvement programme
that aims to excel across the entire steel value chain all the way from the
raw materials mining to marketing and sales of finished steel.
'Kar Vijay Har Shikhar' Operations, the operational improvement programme
will be rolled out in three phases:
* Phase-1 covers blast furnaces, Haldiya Met coke and FAMD.
* Phase-2 includes the coke plant, West Bokaro and the sinter plant.
* Phase-3 looks at the coal and coke value chain, cold rolling, hot metal
and scrap, the Jharia clean coal throughput unit and hot metal logistics.
'Kar Vijay Har Shikhar' Marketing and Sales is pursuing value creation in
the Small and Medium Enterprise market space and has been launched in flat
products, long products, the wires and tubes divisions. This marketing and
sales initiative aim to provide Tata Steel with an additional growth lever,
improve the group's product offering and ability to achieve premium prices
and enhance the service capability of the marketing and sales organisation
in India.
As part of its efforts to enhance its product mix and market presence in
India, the Group continues to look at ways to strengthen its downstream
capability. In January 2011 Tata Steel and Nippon Steel have signed a joint
venture (51:49) agreement to set up India's first Continuous Annealing and
Processing Line (CAPL) for the production of 600,000 tonnes per annum of
automotive cold rolled steel at Jamshedpur. The project is expected to come
on stream in 2013 and will significantly improve our automotive offering in
India.
In Europe, market conditions remain more challenging and improving quality
of earnings remain an even more pressing
objective. In light of this, Tata Steel Europe's management has identified
the following focus areas:
Firstly, to serve customers better, it has adopted a single sales and
marketing function with eight industry-focused marketing sectors with
sector focused commercial teams. The following programs have been put in
place to better serve customer needs:
- Pound 81 million Supply Chain Transformation project aimed to reduce
inventory levels by 16%, with ongoing improvements in Customer Service
levels.
- Euro 35 million investment in the rail facility at Hayange in France to
supply a six-year contract secured with SNCF, the French railway operator,
is expected to be completed to budget for July 2011.
- Engineering work is underway at Redcar to develop a new Pound 32 million
facility to produce steel foundation structures -called monopiles - used to
secure offshore wind turbines to the seabed.
Secondly, TSE is continuously working towards higher levels of operational
excellence through improving asset performance in regards to quality,
reliability and lower costs. An initiative of Pound 100 million of short
payback capital projects to improve operational efficiency across Europe
was launched this year while the Pound 185 million rebuild of the No. 4
furnace will improve operational efficiency at Port Talbot.
TSE's third priority is to achieve cost leadership. Since 2009 the group
has been working on its 'Fit for the future' initiatives to reduce cost and
will build on this to further reduce cost through productivity improvement,
creating flexibility and potential upstream integration. The number of full
time employees in Tata Steel Europe has reduced by 7,500 since September
2008 at the start of the crisis to 34,900 at end March 2011. 1,400 of the
job losses related to the mothballing of Teesside and the remaining 6,100
relates to cost reduction initiatives. Tata Steel Group manages its
portfolio to improve returns on capital employed. It sold Teesside Cast
Products to Sahaviriya Steel Industries, Thailand's largest steel producer,
on 24th March, 2011 in a transaction valued at approximately Pound 434
million (US$700 million). The assets covered by the transaction include the
Redcar and South Bank coke ovens, TCP's power generation facilities and
sinter plant, the Redcar Blast Furnace and the Lackenby Steelmaking
facilities.
The Group is thriving towards technological leadership by continuous
research and development. We currently employ close to 800 researchers in
five technological centres, four in Europe and one India. During the last
financial year the Research and Development project portfolio has been
tailored to meet customer needs and to align with our market sector needs.
Growth:
The second pillar of Tata Steel Group's value creation strategy is
selective growth with an aim to strengthen its position in emerging markets
like India and increase the level of raw material integration and energy
self-sufficiency across the Group.
- The Indian Steel market is growing rapidly and Tata Steel is expanding to
continue to serve its customers. The 2.9 mtpa project to expand crude steel
capacity at Jamshedpur from 6.8 mtpa to 9.7 mtpa is making good progress
and is scheduled for completion in FY 2011-12. The project involves the
installation of a 3 million tonne Blast Furnace, a 6 million tonne Pellet
plant, two 700 k tonne stamp-charged coke oven batteries and a 2.4 million
tonne thin slab casting and rolling facility. Total estimated project cost
is projected at around US $3.3 billion.
- Tata Steel Group continues to work on its project pipeline in India and
South East Asia. The greenfield project at Kalinganagar, to be developed in
two 3 million tonne phases, is the most advanced. The Company has executed
a land lease deed for the location of the plant, obtained final
environmental clearances and statutory clearances for rail transportation,
power and water and has executed contracts for the construction of the iron
and steel making facilities and the slab caster. The construction
activities at the site are progressing satisfactorily.
The project also contemplates leasing iron ore and coal mines in India to
meet the new plant's raw material requirements, as well as the development
of townships for the employees of the plant. Any coal or iron requirements
that are not met through the procurement from the captive mines will be
sourced from third parties. The Company has also obtained an allocation of
a coal block at Jharkhand and the associated approvals for environment
clearance and the mine plan. The Company's application for an iron ore mine
lease is still awaiting government approval.
Another growth area for the group is to leverage its current mining
capability to invest in mining projects outside India to increase the
group's level of self-sufficiency in raw materials, as raw materials prices
remain at all time highs. Currently Tata Steel's most significant interests
include:
- A joint venture with Riversdale Mining Limited for the development of the
Benga and Tete coking coal tenements in Mozambique. The project is planned
to be executed in three phases with planned production of 5.3 million tonne
of run of mine coal in Phase I, 10.6 million tonne of run of mine coal per
annum in Phase II and 20 million tonne of run of mine coal per annum in
Phase III.
- A joint venture with New Millennium Capital Corporation, a listed entity
in Canada, for development of Direct Shipping Ore Project in Canada was
incorporated in October 2010. Tata Steel holds 80% stake in the JVC and has
100% off-take rights. It is expected that the JV will produce 4 million
tonnes per year of iron ore products commencing in 2012.
- Tata Steel signed an additional heads of agreement with New Millennium
Capital Corporation on 6th March, 2011 for the development of the LabMag
and KeMag iron ore deposits, known collectively as the Taconite Project.
Under the heads of agreement, Tata Steel shall participate in the
development of a feasibility study of the Taconite Project and contribute
towards 64% of the costs related thereto. The parties would enter into a
binding joint venture agreement upon the successful completion of the
Feasibility Study and Tata Steel electing to develop one or both of the
deposits. After formation of the joint venture, New Millennium Capital
Corporation is expected to hold a 36% equity interest in the Taconite
Project, including a 20% free carry equity interest.
- 5% interest in the Carborough Downs Coal Project located in Queensland
Australia with an off-take agreement.
INTEGRATION:
Performance Improvement Teams (PITs) contributed in the area of
manufacturing during the financial year 2010-11 by implementing improvement
projects in multiple locations of the Tata Steel Group.
As of April 2011, 21 Performance Improvement Teams (PIT) are operating
effectively across the Group as against 17 in the financial year 2009-10.
14 PITs have dedicated work streams for focused problem solving, targeting
areas of importance for the group. New PITs in Billet Casting and Tubes
have been introduced during the year.
With most of Europe gradually coming out of recession, PITs have
concentrated on improving manufacturing effectiveness and efficiency of
operations. Notable contributions of the PITs have been on:
(a) Using higher percent low cost coals with reduced coking times in coke
making,
(b) Increased usage of reverts thus saving on cost of iron ore, cost of
landfill while meeting the environmental regulations;
(c) I mprovements in steelmaking and casting by reducing process
variations, improving yield, etc;
(d) Improving quality and yield while reducing cost in rolling. In the
financial year 2011-12, efforts are being made to extend PITs to other
functions like Supply Chain, Commercial, etc.
As an overall integrating tool, the Tata Business Excellence Model (TBEM),
a business assessment model based on the Malcolm Baldridge Model of US,
which has been adopted by most of the Tata Group Companies, is being rolled
out across Tata Steel Europe. The TBEM methodology has been designed to
help improve organisational performance practice, capabilities and results.
OUTLOOK:
As reported by the 'World Economic Outlook'(WEO) issued by the
International Monetary Fund in April 2011, the world economy is expected to
grow at 4.5% in the years 2011 as well as 2012. The advanced economies are
projected to grow at 2.5% while the emerging and developing economies will
be growing at a higher level of 6.5%.
The recovery from the global economic downturn remains unbalanced. In the
advanced economies, output is far below potential and the unemployment
continues to be high, with a risk of having a lower growth in these
economies fuelling the unemployment issue further. In the US, the fiscal
consolidation is ongoing with the housing market remaining depressed. In
Japan, the immediate focus is on reconstruction and there will be an effort
to link the reconstruction spending to a fiscal strategy to bring down the
public debt ratio over the medium term. In the EU, recovery is proceeding
in a modest pace with the output still below potential and unemployment
high. WEO reports that Germany and France are expected to grow at 2.5% and
1.5% respectively during 2012 while rapid growth is expected to continue in
Asia with a growth projection of 6.7% in 2011 and 6.8% in 2012. China and
India, as a part of the developing Asia are set to grow at 9.6% and 8.2%
respectively during 2011 and 9.5% and 7.8% in 2012 with private demand
growing in China while infrastructure remains a key contributor to growth
in India.
The World Steel Association (WSA) in its short range outlook issued in
April 2011 states that the world consumption of steel is expected to be
1.359 billion tonnes in 2011 registering a growth of 6% over 2010,
following a growth of 13.2% growth in 2010. Steel demand is expected to
grow further by 6% to 1.441 billion tonnes in 2012. The forecast of WSA
suggests that the steel demand in China in 2011 is set to rise by 5% to 605
million tonnes while that in India it is expected to reach 68.7 million
tonnes, registering a growth of 13.3%. In 2012, China is expected to
maintain the growth of 5% while India is expected to accelerate by 14.3%.
The recovery in the US estimated to lead the steel consumption to 13%
growth to be at 90.5 million tonnes with the construction market remaining
weak. The forecast of steel consumption in Japan is yet to be firmed up
after the tragic earthquake and Tsunami. Apparent steel use in the EU is
forecast to grow by 4.9% in 2011 to be at 151.8 million tonnes with Germany
and France the leading economies which are expected to lead the steel use
recovery particularly in the automotive and machine building sectors.
FINANCE:
In FY 11, the world emerged from the depths of the financial crisis as most
economies moved out of technical recession or negative growth. Governments
and monetary bodies, through large fiscal spending, zero interest rate
policies and easy credit have averted the possibility of mass banking
collapse and financial crisis. The developed world has now entered a period
of slow and uncertain growth, which cannot be accelerated by relying on the
same policies without creating a fresh crisis in the shape of sovereign
defaults and an inflationary spiral. Emerging markets which have robust
growth are importing inflation from the rest of the world and though they
are raising interest rates, local monetary tightening has been of limited
benefit so far.
During the financial crisis, the Company had focused on raising additional
debt in order to maintain a liquidity buffer given the uncertain nature of
the steel markets. However, given the lower level of earnings and increased
debt, the leverage position of the Company had become sub-optimal.
Therefore in FY 11, the Company continued on its journey of deleveraging.
It repaidRs.4,258 crores of borrowings during the year. At the same time,
given the substantial improvement in liquidity in financing markets, the
Company in FY 11 refinanced the entire acquisition debt in Tata Steel
Europe. Tata Steel UK Holdings, on 29th September, 2010, signed a Senior
Facility Agreement with a syndicate of 13 banks for a Pound 3.53 billion
term loan and revolving credit facility which replaced in full the term
loan and revolving credit facilities entered into at the time of the
acquisition of Corus Group plc in 2007. The new facilities have been
designed to achieve certain key financing and business objectives for the
company: the syndicate comprises a smaller, co-ordinated group of Banks
with long-term relationships with Tata Steel; repayment obligations for the
next 5 years have been minimised; there is flexibility to incur higher
capital expenditure in Europe and to raise working capital depending on
business needs; and the new financing arrangements carry lighter financial
covenant obligations. However, given the business environment and earnings
profile of the Company, there was a need for a further rebalancing of the
capital structure. This needed to be achieved by a combination of disposals
of non-core assets, raising of equity and quasi equity funds. The Company
is continuing to dispose of stake in other Tata Group Companies which are
unrelated to its business. In addition, the Company completed the sale of
the Teesside Cast Products unit of Tata Steel Europe in a deal valuing the
business at around Pound 434 million in March 2011 and 51% of its 77.46%
stake in Tata Refractories Limited in a deal valuing the equity of TRL at
Rs. 1,130 crores in April 2011. In January 2011, the Company completed a
further public offer for ordinary shares in the domestic markets
aggregating Rs.3,477 crores. In December 2010 and January 2011, it drew
Rs.3,000 crores via issuance of 20 year Non-Convertible Debentures, where
the Company will have no cash outgo on account of interest for the first 3
years. In March 2011, the Company also successfully completed India's first
ever offering of Corporate Hybrid Securities with an issuance of Rs. 1,500
crores (US$ 332 million). These securities rank senior only to share
capital, are perpetual in nature with no maturity or redemption and are
callable only at the option of the Company thereby incorporating equity
characteristics.
As part of the financing of the imports for the 2.9 mtpa expansion in
Jamshedpur, the Company also tied up long-term ECA backed buyer's credit of
72.85 million to be drawn over the next 18 months and repaid over the next
ten years. As on 31st March, 2011, the cash and cash equivalent in Tata
Steel Limited, India was Rs.4,142 crores and Rs.10,893 crores for the
Group.
FINANCIAL PERFORMANCE:
Tata Steel Standalone:
Profit after tax at Rs.6,866 crores during the financial year 2010-11 was
higher by 36% as compared to the financial year 2009-10 (7 5,047 crores).
The diluted earnings per share was at Rs.70.99 for FY 11 (FY 10: Rs. 57.31)
while the basic earnings per share for FY 11 was at Rs.75.63 (FY 10:
Rs.60.26).
The analysis of major items of the financial statements is shown below:
a) Net sales and other operating income:
Figures in Rs.crores
FY 11 FY 10 Change Change%
Sale of product 30,748 25,756 4,992 19%
Sale of power and 796 657 139 21%
water
Income from town,
medical and other 36 40 (4) (10%)
services
Other operating 323 305 18 6%
income
Sales and other 31,902 26,758 5,144 19%
operating income
Less: Excise Duty 2,506 1,736 770 44%
Net sales and
other operating 29,396 25,022 4,374 17%
income
Steel sales volume during FY 11 at 6.42 million tonnes recorded an increase
of 4% over FY 10 (6.17 million tonnes). Higher prices across all divisions
and higher volumes in Tubes, Wires and Bearings divisions also contributed
to the increase in net sales. The division wise net sales are shown below:
Figures in Rs.crores
Net Sales FY 11 FY 10 Change Change%
Steel 25,568 21,928 3,639 17%
Tubes 1,616 1,387 229 16%
Ferro Alloys and 2,045 1,553 492 32%
Minerals
Bearings 167 153 14 9%
Total 29,396 25,022 4,374 17%
b) Purchase of finished, semi-finished steel and other products:
Figures in Rs. crores
FY 11 FY 10 Change Change%
Purchase of 480 169 11 7%
finished, semi-
finished steel and
other products
The purchase of finished and semi-finished products were almost at par with
the previous year with higher purchases at Bearings division and Agrico
units to support higher volumes. These increases were partly offset by
lower purchases for captive consumption (repairs etc.) by the Steel Works.
c) Raw materials consumed:
Figures in Rs. crores
FY 11 FY 10 Change Change%
Raw Materials 6,244 5,495 749 14%
consumed
Increase in production, steep increase in cost of imported coal, use of
purchased / imported coke during the year, higher cost and consumption of
imported limestone, higher zinc cost, higher consumption and cost of ferro
alloys were the primary factors increasing the 'Raw materials consumed' for
the company. These increases were partly compensated by lower raw materials
consumed at Ferro Alloys & Minerals Division and lower consumption of zinc
and pyroxenite at the Steel Works.
d) Payments to and provisions for employees:
Figures in Rs. crores
FY 11 FY 10 Change Change%
Payments to and
provisions for 2,618 2,361 257 11%
employees
The payments to and provisions for employees were higher by 11% over the
previous year primarily on account of increase in dearness and other
allowances, normal increments and increases in retirement gratuity and
leave salary liability on actuarial valuation allowance . These increases
were partially compensated by lower charge on account of Employee
separation scheme in the current year as the amortisation of the expenses
completed by March 2010.
e) Stores consumed:
Figures in Rs. crores
FY 11 FY 10 Change Change%
Stores consumed 1,431 1,335 96 7%
Stores including industrial gases and spares consumed increased over FY 10
by 7% primarily on account of higher price and consumption of operational
refractories, industrial gases, and other stores & spares consumed to
support higher production across different divisions, partly offset by
lower consumption at Growth Shop.
f) Repairs to machinery:
Figures in Rs. crores
FY 11 FY 10 Change Change%
Repairs to 1,066 979 87 9%
Machinery
Repairs to machinery increased by 9% as compared to FY 10 mainly on account
of increase in civil contract jobs, overhauling and other equipment
maintenance, electrical and mechanical maintenance activities at mines and
collieries, various steel-making and finishing mills in the Steel Works and
Ferro Alloys & Minerals division.
g) Conversion charges:
Figures in Rs. crores
FY 11 FY 10 Change Change%
Conversion charges 1,193 1,133 60 5%
There was an increase in the Conversion charges by 5% over FY 10 primarily
due to increases in conversion activities in Long products, Tubes and
Agrico divisions, higher rates in Long products, Tubes and Ferro Alloys &
Minerals division partly compensated by lower conversion charges for the
tin coated products.
h) Purchase of power:
Figures in Rs. crores
FY 11 FY 10 Change Change%
Purchase of power 1,405 1,268 137 11%
While the purchase of power for own use was lower as compared to the
previous year, higher purchases for sale to outside customers led to the
increase in overall purchase of power for the company. There was also an
increase in cost of power at the Ferro Alloys and Minerals division and
Wires division.
i) Freight and handling charges:
Figures in Rs. crores
FY 11 FY 10 Change Change%
Freight and 1,541 1,357 184 14%
handling charges
Higher volumes of Steel, Tubes, Ferro Alloys and minerals despatches along
with increase in rates and change in destination mix for steel products,
higher handling charges and demurrage charges led to the 14% increase in
Freight and handling charges.
j) Royalty:
Figures in Rs. crores
FY 11 FY 10 Change Change%
Royalty 615 276 339 123%
Royalty charges more than doubled during the current year due to increase
in royalty rates on iron ore and also due to full year impact of change in
tariff and payment of royalty on processed coal instead of raw coal at our
collieries.
k) Rates and Taxes:
Figures in Rs. crores
FY 11 FY 10 Change Change%
Rates & Taxes 291 237 54 23%
Rates and taxes during FY 11 increased primarily on account of introduction
clean energy cess on coal and increase in export duty for Ferro Alloys &
Minerals division due to increase in volume of exports.
l) Other expenses:
Figures in Rs. crores
FY 11 FY 10 Change Change%
Other expenses 1,270 1,285 (15) (1%)
Other expenses in FY 11 remained almost at the level of FY 10 with increase
in post retirement medical benefits in accordance with AS-15, higher
expenditure on research and development and other operational expenses,
almost offset by foreign exchange gain and lower bank charges due to
partial conversion of CARS into FCCBs.
m) Net Finance charges:
Figures in Rs. crores
FY 11 FY 10 Change Change%
Net Finance 1,300 1,508 (208) (14%)
charges
The decline in net finance charges represents lower interest on term loans
due to repayments partly offset by interest on Non-convertible Debentures
issued during the year.
n) Fixed Assets:
Figures in Rs. crores
FY 11 FY 10 Change Change%
Gross Block 29,816 26,150 3,666 14%
Less: Impairment 126 106 20 19%
Less: Depreciation 10,915 10,038 877 9%
Net Block 18,774 16,006 2,768 17%
The increase in fixed assets represents primarily the 1.8 mtpa expansion
and 2.9 mtpa expansion projects at Jamshedpur Works.
o) Investments:
Figures in Rs. crores
FY 11 FY 10 Change Change%
Trade investments 1,889 1,781 108 6%
Investment in sub- 41,676 41,480 196 0%
sidiary companies
Investment in 3,000 1,719 1,281 75%
mutual funds
Total investments 46,565 44,980 1,585 4%
Investments increased by 4% over March 2010 primarily due to increase in
current investments (in mutual funds). Increase in trade investments
include investment in Dhamra Port, Tata Industries partly offset by sale of
shares in Tata Power and Tata Motors. Increases in investments in
subsidiary companies represent investment in Tata Steel Holdings Pte Ltd.,
TS Alloys Ltd. and TM Mining Ltd.
p) Stores and spares and Stock-in-trade:
Figures in Rs. crores
FY 11 FY 10 Change Change%
Stores & Spares 716 624 92 15%
Stock-in-trade 3,238 2,454 784 32%
Total inventories 3,954 3,078 876 28%
The stock of stores and spares inventory was kept higher primarily due to
requirements during planned shutdowns in various units in the Steel Works
during the first quarter of FY 2011-12. The raw materials stock increased
due to increases in volume and value of imported coal, iron ore, limestone
and ferro alloys. Increase in prices of raw materials led to the increase
in value of finished and semi-finished products.
q) Sundry Debtors:
Figures in Rs. crores
FY 11 FY 10 Change Change%
Gross Debtors 450 456 (6) (1%)
Less: Provision for
doubtful debts 22 21 1 3%
Net Debtors 428 435 (7) (2%)
Debtors as on 31st March, 2011 declined marginally over the level as at end
March 2010 due to stringent credit control measures and lower steel
exports.
r) Loans and Advances:
Figures in Rs. crores
FY 11 FY 10 Change Change%
Loans and 15,689 5,504 10,185 185%
advances
The increase primarily represents advance against equity and Shareholders'
loans to Tata Steel Holdings and Centennial Steel, and amount receivable
against forward covers.
s) Cash flow and Net debt: Cash Flow:
Figures in Rs.crores
FY 11 FY 10 Change
Net Cash flow from operating 8543 8369 174
activities
NetCash flow from investing (13,288) (5,255) (8,033)
activities
Net Cash flow from financing 5,653 (1,473) 7,126
activities
Net increase/(decrease) in cash 907 1,641 (734)
& cash equivalents
Net cash flow from operating activities: Net cash generated from operating
activities was Rs.8,543 crores during the year ended 31st March, 2011 as
compared to Rs.8,369 crores during April to March 2010. The cash operating
profit before working capital changes and direct taxes during FY 11 was
Rs.11,229 crores, as compared to Rs.9,049 crores during FY 10, as a result
of higher profits during the current year. Increase in inventories and
receivables in the current year were more than compensated by increase in
creditors resulting in a decrease in working capital. The payment of income
taxes (including the dividend distribution tax) during FY 11 was Rs.2,870
crores as compared to Rs.2,079 crores during the same period last year.
Net cash from investing activities: Net cash outflow from investing
activities amounted to Rs.13,288 crores in FY 11. The outflow broadly
represents an incremental investment in subsidiaries (7 5,312 crores),
inter-corporate deposits/ shareholders' loan (7 3,707 crores) and capex (7
4,322 crores), sale of fixed assets (7 387 crores), interest and dividend
income received (7 256 crores).
Net cash from financing activities: Net cash inflow from financing
activities was Rs.5,653 crores during FY 11 as compared to an outflow of
Rs.1,473 crores during FY 10. The inflow was primarily from issue of
Perpetual securities (7 1,500 crores), issue of equity (7 4,546 crores) and
fresh borrowings net of repayments (7 2,155 crores). The outflows during
the current year were represented mainly by interest and dividend payments
of Rs.1,610 crores and Rs.708 crores respectively.
Net debt:
Figures in Rs.crores
FY 11 FY 10 Change
Secured loans 2,009 2,259 (250)
Unsecured loans 26,292 22,980 3,312
Total Debt 28,301 25,239 3,062
Less: Cash and Bank balances 4,142 3,234 907
Less: Current investments 3,000 1,719 1,281
Net Debt 21,160 20,286 874
During the current fiscal year, net debt increased by Rs.874 crores as
compared to the balances as on 31st March, 2010. The increase in Gross
debts by Rs.3,062 crores primarily includes NCDs of Rs.3,073 crores, and
exchange fluctuation of Rs.833 crores partly offset by repayment of loans.
Current investment and cash balance was higher by Rs.1,281 crores and by
Rs.907 crores respectively as compared to 31st March, 2010.
Tata Steel Group:
Tata Steel Group turned around in FY 11 by posting a profit after tax
(after minority interest and share of profit of associates) of Rs.8,983
crores against a loss of7 2,009 crores in the previous year, the primary
highlights being higher gross deliveries and prices across the Group and
profit on disposal of Teesside Cast Products at TSE, partly offset by
increasing input cost.
Net sales and other operating income:
Figures in Rs.crores
FY 11 FY 10 Inc./(Dec.)
Tata Steel 29,396 25,022 4,374
TS Europe 75,991 65,843 10,148
NatSteel Holdings 7,413 6,254 1,159
TS Thailand 3,911 3,157 754
Others 14,105 9,944 4,161
Eliminations & adjustments (12,063) (7,827) (4,236)
Group Total 1,18,753 1,02,393 16,360
Turnover for the Group improved by 16% during the current financial year as
compared to FY 10 due to better prices and gross deliveries across the
Group. Increase in the Group turnover was also contributed by higher
turnovers registered by NatSteel Asia (minerals business), Tata Steel
Processing & Distribution Limited (TSPDL), Tata Steel KZN Pte Ltd., Tata
Metaliks Limited (TML), Jamshedpur Utilities and Services Company (JUSCO),
TM International Logistics Limited (TMILL), Indian Steel and Wire Products
Limited (ISWPL).
Purchase of finished, semi-finished and other products:
Figures in Rs.crores
FY 11 FY 10 Inc./(Dec.)
Tata Steel 180 169 11
TS Europe 9,472 7,946 1,526
NatSteel Holdings 5,613 4,281 1,332
TS Thailand 2,141 1,837 304
Others 1,808 1,304 504
Eliminations & adjustments (3,324) (2,426) (898)
Group Total 15,890 13,111 2,779
The purchase of finished and semi-finished products increased by 21% over
FY 10 mainly due to increases in TSE, NatSteel Holdings and TSTH
representing higher volumes purchased to support increase in volume of
operations / resale as well as higher prices. Included in 'others' is
higher volumes purchased at TSPDL and Tata BlueScope (a Joint Venture) to
support increased operations and also the accounting effect of treating
TSPDL as a JV (50%) in last year's Q1 as opposed to a 100% subsidiary now.
Raw Materials consumed:
Figures in Rs.crores
FY 11 FY 10 Inc./(Dec.)
Tata Steel 6,244 5,495 749
TS Europe 29,624 23,700 5,924
NatSteel Holdings 105 101 4
TS Thailand 783 464 319
Others 8,429 5,802 2,627
Eliminations & adjustments (7,141) (4,558) (2,583)
Group Total 38,044 31,004 7,040
Raw materials consumed for the Group increased by 23% over FY 10 primarily
due to steep increases in the cost of raw materials in general. Apart from
the increase in prices higher volumes also led to the increase in 'Raw
materials consumed'. Increase in 'Others' reflect the increases primarily
at NSA (minerals business) and Tata Metaliks Limited.
Payments to and Provisions for Employees:
Figures in Rs.crores
FY 11 FY 10 Inc./(Dec.)
Tata Steel 2,618 2,361 257
TS Europe 11,691 13,269 (1,578)
NatSteel Holdings 450 388 62
TS Thailand 95 88 7
Others 477 369 108
Eliminations & adjustments (44) - (44)
Group Total 15,287 16,475 (1,188)
Staff cost for the Group in FY 11 was lower by 7% over FY 10. Reduction in
TSE was mainly due to fall in head count arising from the 'Fit for the
Future' initiative and lower pension costs at Netherlands. Staff cost
increased in the Indian operations during the current year primarily on
account of normal wage increases, change in actuarial assumptions and steep
increase in dearness allowance partly offset by lower charges on ESS.
Increase in NSH was due to normal wage increases and an increase in head
count. 'Others' include the effect of arrear wages in JUSCO.
Purchase of Power:
Figures in Rs.crores
FY 11 FY 10 Inc./(Dec.)
Tata Steel 1,405 1,268 137
TS Europe 1,758 2,022 (264)
NatSteel Holdings 312 250 62
TS Thailand 325 291 34
Others 319 247 72
Eliminations & adjustments (104) (27) (77)
Group Total 4,015 4,051 (36)
Purchase of Power for the Group in FY 11 was almost at par with power
purchased in FY 10. Reduction in TSE was primarily due to ongoing energy
saving initiatives. This was partly offset by increase in Tata Steel India
(due to increase in power tariff and higher purchases for sale to other
consumers, partly compensated by lower volumes purchased for own use), NSH
(primarily higher power costs), TSTH (higher volumes) and'Others'(increase
in rates for TS Alloys and JUSCO).
Freight and handling charges:
Figures in Rs.crores
FY 11 FY 10 Inc./(Dec.)
Tata Steel 1,541 1,357 184
TS Europe 3,704 3,380 324
NatSteel Holdings 156 148 8
TS Thailand 31 26 5
Others 1,028 701 327
Eliminations & adjustments (70) (58) (12)
Group Total 6,390 5,554 836
Freight and Handling charges were higher by 15% in FY 11 over FY 10 mainly
on account of increase in deliveries by all entities and higher freight
rates. 'Others' include TMILL, a group logistics company, where the charges
were higher than the last year mainly due to increase in volume of
operations.
Other Expenditure:
Figures in Rs.crores
FY 11 FY 10 Inc./(Dec.)
Tata Steel 6,149 5,284 865
TS Europe 16,736 16,813 (77)
NatSteel Holdings 565 522 43
TS Thailand 509 438 71
Others 1,576 1,160 416
Eliminations & adjustments (1,047) (722) (325)
Group Total 24,488 23,495 993
Other Expenditure represents the following expenses:
Figures in Rs.crores
FY 11 FY 10 Inc./(Dec.)
Stores and spares consumed 7,259 7,764 (505)
Fuel oil consumed 875 833 42
Repairs to buildings 415 358 57
Repairs to machinery 4,860 4,690 170
Relining Expenses 87 91 (4)
Conversion charges 1,125 1,083 42
Rent 2,833 2,544 289
Royalty 622 281 341
Rates and Taxes 728 682 46
Insurance charges 311 266 45
Commission, Rebates and 229 262 (33)
Discounts
Loss on Discarded Assets - - -
Provision for Wealth Tax 1 1 (0)
Short/Excess Provision in (19) (15) (4)
Previous years (Net)
Other Expenses 5,567 5,291 276
Provision for Doubtful Debts 189 104 85
and Advances
Excise Duty 94 87 7
Less: Exp (other than inter-
est) trfd to capital and other 688 827 (139)
accounts
Other Expenditure 24,488 23,495 993
Other Expenditure in FY 11 was 4% higher than FY 10. Increase in
production, higher repairs, higher post retirement medical benefits,
increase in royalty rates on iron ore, introduction of clean energy cess on
coal, higher conversion activities are the principal reasons for increase
in other expenses in Tata Steel India. 'Others' includes the effect of
unfavourable exchange fluctuation on loans at Tata Steel KZN, higher
expenses at TSPDL and JUSCO due to higher volume of operations.
Net Finance Charges:
Figures in Rs.crores
FY 11 FY 10 Inc./(Dec.)
Tata Steel 1,300 1,508 (208)
TS Europe 1,910 1,626 284
NatSteel Holdings 34 40 (6)
TS Thailand 43 21 22
Others (210) (173) (37)
Eliminations & Adjustments (307) 0 (307)
Group Total 2,770 3,022 (252)
Net finance charges for FY 11 was lower than FY 10 with the reduction in
Tata Steel India's Net finance charges representing primarily lower
interest on term loans arising out of repayments, higher interest income on
short-term deposits partly offset by lower capitalisation of interest. This
reduction was partly offset by increase in TSE due to interest on NSFA (New
Senior Facility Agreement) and increased drawdowns on the revolving credit
facilities in the UK and Netherlands. 'Others' include the impact of
interest income at Tata Steel Global Holdings for loan provided to TSE.
Stores and Spares Stock:
Figures in Rs. crores
FY 11 FY 10 Change
Tata Steel 716 624 92
TS Europe 715 688 27
NatSteel Holdings 71 66 5
TS Thailand 237 249 (12)
Others 105 89 16
Eliminations & adjustments (2) (1) (1)
Group Total 1,842 1,715 127
Stores and Spares stock were in consistence with the consumption
requirements of individual entities.
Stock-in-trade:
Figures in Rs. crores
FY 11 FY 10 Change
Finished Goods 8,137 6,655 1,482
WIP 4,046 3,685 361
Raw Materials 10,031 6,632 3,399
Total Inventory 22,214 16,972 5,242
Tata Steel 3,238 2,454 784
TS Europe 16,804 12,471 4,333
NatSteel Holdings 748 737 11
TS Thailand 782 649 133
Others 675 665 10
Eliminations & adjustments (33) (4) (29)
Group Total 22,214 16,972 5,242
Finished Goods inventory has gone up across the group mainly due to higher
valuations of inventory driven by steep increases in raw material prices
while the volumes have come down in all entities. Inventory of raw
materials increased due to increase in volumes and prices of coal and iron
ore.
Sundry Debtors:
Figures in Rs. crores
FY 11 FY 10 Change
Tata Steel 428 435 (7)
TS Europe 10,862 10,030 832
NatSteel Holdings 484 543 (59)
TS Thailand 187 123 64
Others 8,489 1,283 7,206
Eliminations & adjustments (5,634) (902) (4,732)
Group Total 14,816 11,512 3,304
Overall debtors balance for the Group at end March 2011 was higher by Rs.
3,304 crores than end March'10. Debtors in India were maintained almost at
last year's level in spite of increase in turnover due to stricter credit
control and better collections. Considering debtors of Rs. 4,405 crores of
TSE securitised by ProCo, debtors of TSE have gone up by around Rs. 5,237
crores. ProCo debtors included in 'Others' are receivable from TSE on
account of securitisation of debtors as mentioned above and coal supplies
and advance against sale of coke.
Cash Flow and Net debt:
Cash Flow:
Net cash flow from operating activities: The Group generated Rs. 6,463
crores from operations during FY 11 as compared to Rs. 10,502 crores in FY
10. While the consolidated profit in the financial year 2010-11 at Rs.
8,983 crores was higher than FY 10, cash from operations was lower than the
last year due to increase in working capital in FY 11, whereas during the
last year there was reduction of working capital thus releasing cash into
operations. In FY 11 working capital has gone up by Rs. 7,175 crores mainly
due to increase in TSE's working capital (including working capital infused
during the year through Global ProCo), the increase being in inventories
(due to increase in prices) and also in receivables.
Net cash from investing activities: A sum of Rs. 8,379 crores was applied
in the current year towards investing activities including capex of
Rs.10,416 crores partly offset by sale proceeds of TCP.
Net cash from financing activities: Cash from financing activities (equity
raised / loans availed net of repayments and interest payments) amounted to
Rs. 5,993 crores in the current year as compared to Rs. 5,135 crores of
cash applied during last year. Current year cash from financing include Rs.
1,500 crores from issue of perpetual securities and Rs. 5,309 crores raised
from other loans (net of repayments).
Thus, the net increase in cash and cash equivalents was Rs. 4,077 crores in
the year 2010-11 with a balance of Rs. 10,893 crores as on 31st March. 2011
against a balance of Rs. 6,815 crores as on 31st March. 2010.
Net Debt
Figures in Rs. crores
FY 11 FY 10 Change
Secured Loans 28,604 28,059 545
Unsecured Loans 32,080 25,041 7,039
Total Debts 60,684 53,100 7,584
Less: Cash and Bank Balances (10,893) (6,815) (4,078)
Less: Current Investments (3,159) (1,931) (1,228)
Net Debt 46,632 44,354 2,278
Gross Debt at Rs. 60,684 crores at end March 2011 was higher than March
2010 by Rs. 7,584 crores mainly due to fresh loans (net of repayments)
primarily at Tata Steel India, TSE, and Centennial Steel. The increase in
gross debts was partly offset by higher cash balances and increase in
liquid fund investments in Tata Steel India. The net debt at end March 2011
was Rs. 46,632 crores as compared to Rs. 44,354 crores at end March 2010.
RISKS, OPPORTUNITIES AND THREATS:
Tata Steel Group aims to address the opportunities offered and threats
posed by its business environment strategically by maintaining sustainable
and robust business models and further improving on them. Tata Steel's
response to its risks, opportunities and threats is discussed in the
sections below. Growth Strategy:
Since FY 2004-05, the Group has added capacity of 25 million tonnes across
South-East Asia, the United Kingdom and Europe through acquisitions. The
crude steel capacity at its existing steel plant in Jamshedpur will have
increased by almost 3 million tonnes to 9.7 million tonnes in the financial
year 2011-12 (production in FY 2010-11: 6.855 million tonnes). There are
substantial market opportunities, in India particularly, those warrant
further expansion of steel capacity.
The greenfield project in Odisha, India, is progressing and capacity is
planned to increase by 6 million tonnes in two phases of 3 million tonnes
each, the first phase to become operational by 2014. The opening of the
Dhamra port, a 50%-50% joint venture with Larsen & Toubro, will to improve
the logistics for the Indian operations. Tata Steel's installed capacity in
Europe is sufficient to address regional demand. Growth in this region is
planned to take place via technical innovation and diversified product
offerings to identified market sectors. Initiatives supporting this include
a strategic review of the asset portfolio, business specific improvement
plans and securing access to cost-effective raw materials.
Industry Cyclicality:
The steel industry is subject to cyclical swings arising from factors such
as excess capacity, regional demand & supply imbalances and volatile swings
in market demand and prices, more recently exacerbated by quarterly pricing
for iron ore and metallurgical coal.
Global demand surpassed the pre-crisis peak in the financial year 2010-11,
driven by strong demand in the developing economies, notably China. Prices
for iron ore and metallurgical coal spiked, exacerbated by supply
disruptions due to flooding in Queensland, Australia. The Indian operations
benefitted from strong domestic demand and achieved record output at 6.855
million tonnes. The South East Asian plants also benefitted from good
demand and operated close to full capacity.
Steel demand has not recovered to pre-crisis levels in the developed
countries. Tata Steel Europe continued to calibrate its production at
levels consistent with market demand in the UK and Europe.
Raw Materials Security and Price Volatility:
During the financial year 2010-11, high raw material prices have only
reinforced the validity of the strategic objective to achieve greater raw
material security to insulate the Group from swings in prices. Further
steps have been taken to achieve this.
The development of the Benga project in Mozambique, a 35%-65% joint venture
with Riversdale, continues and first production is expected by the second
half of 2011; after taking control of Riversdale, Rio Tinto has indicated
to accelerate the development of this project. A decision to invest in the
Direct Shipping Ore project in Labrador, Canada, through the joint venture
with NML was taken during the financial year and first production is
expected by the second quarter of 2012. In addition, a feasibility study
will be undertaken with regard to the adjacent LabMag and KeMag projects;
together, these contain an estimated 5.6 billion tonnes of iron ore
reserves.
Quarterly contracts, for iron ore based on spot-pricing, have now become
the norm and these have resulted in shorter procurement cycles and greater
volatility in iron ore and metallurgical coal prices. The Group, in
particular Tata Steel Europe, is working with suppliers to achieve
competitive prices and has agreed a range of pricing bases, whilst
adjusting its commercial policy to maximise opportunities presented by
moves to shorter-term pricing, and has long-term supply contracts
sufficient to cover its requirements. Furthermore, programmes are in place
to more flexibly operate the existing capacity. Health, Safety &
Environmental Risks: The manufacture of steel involves steps that are
potentially hazardous if not executed with due care. The Group's businesses
are subject to numerous laws, regulations and contractual commitments
relating to health, safety and the environment in the countries in which it
operates and these rules are becoming more stringent. In Europe, auction
based proposals by the EU Commission for Phase 3 of the Emission Trading
Scheme ('ETS') could, as they currently stand, have a significant negative
financial impact post 2012.
Regarding Health & Safety, the Group's philosophy is that all injuries can
be prevented. The Group aims to reduce the lost time injury frequency to
0.4 per million hours worked by 2012. Due to the nature of these
operations, extra efforts are being taken to ensure workplace safety in the
mines and collieries in India. To meet environmental standards, dust and
other emission levels are monitored to ensure they stay within permissible
limits. The Group continues to invest to reduce CO2 emissions in accordance
with its goal to reduce CO2 emissions to 1.9 tonne per tonne of liquid
steel by 2012. The commissioning of the HlsarnaTM pilot plant is a further
step to come to a commercially viable technology to significantly reduce
CO2 emissions from ore based steelmaking.
Technology Risks:
A key challenge of the Group is to ensure that its plants are equipped with
updated technologies in order to serve clients, secure cost competitiveness
and maintain R&D leadership. To that effect, the Group's R&D efforts have
continued to be geared at improving existing processes to advance the
Group's cost competitive position.
R&D efforts are also being made to advance the Group's proprietary
knowledge in order to produce new generations of steel products.
Furthermore, the Group has engaged in a 600 k tonnes Continuous Annealing
Processing Line Joint Venture with Nippon Steel Corporation ('NSC'). This
JV will benefit from NSC's world class technology for production of high-
grade cold-rolled steel sheet and Tata Steel's leadership position in the
Indian automotive industry to serve its customers with innovative products
& services.
Financing:
Tata Steel Group's expansion is dependent on sufficient cash generation and
attracting fresh equity and loans to that effect. The debt for the Corus
acquisition in 2007 that resides in Tata Steel Europe's balance sheet is a
specific risk to the Group in the light of a set of covenants to be met. In
September 2010, Pound 3,670 m of senior secured facilities arranged for
this purpose were refinanced with new senior secured facilities comprising
Euro 3,400 m of term loans and a Pound 690 m revolving credit facility, to
provide future working capital for Tata Steel Europe. These facilities have
final maturities of between five and seven years, and minimise repayment
obligations over the next five years.
Pensions:
Tata Steel Europe has significant pension obligations arising from the
provision of retirement benefits including defined benefit plans to
virtually all its employees. The market value of its net pension assets
substantially exceed the net assets of Tata Steel Europe and thus any
adverse change can have a material impact on its financial statements as
well as on the level of company pension contributions.
TSE has put in place a framework to manage pension risks and works with
schemes' trustees to ensure that obligations remain affordable and
sustainable. As part of this framework proposals have been announced to
close the UK defined benefit scheme to new recruits, and to cap the
contribution rate for future service for existing members at an affordable
and sustainable level. A range of measures has already been adopted by the
principal schemes in TSE to manage liabilities and to protect against
investment market risk exposure, whilst maintaining asset performance.
Further actions will be considered as and when appropriate. Forex, Credit,
Liquidity and Counterparty Risk: Through its global operations, the Group
operates in several currency areas. The major currencies used in its sales
and procurement activities are the US Dollar, Euro, Sterling and the Indian
Rupee. Volatility in the currency markets can adversely affect the outcome
of commercial transactions and cause trading uncertainties.
The Group has foreign exchange hedging policies in place to protect its
trading and manufacturing margins against rapid and significant foreign
exchange movements. Related to its pro-active funding strategies (see
'Financing'), cash and bank balances of the Group stood at Rs. 10,893
crores as at 31st March, 2011.
The Group imposes strict approval procedures and limits to contain
counterparty risks and does not enter into leveraged derivative
instruments.
Regulatory & Compliance Risks:
The Group operates in multiple geographies and thus has compliance
obligations with diverse and complex laws and regulations. In countries
where the political systems are still evolving, frequent changes to
investment and economic policies are common and any unforeseen changes can
expose the Group's businesses.
To limit such exposures, the Group operates primarily in countries where
investment flows are free and where well-established political, business
and legal frameworks are in place. For new investments into emerging
economies, country risk assessments are conducted as part of the investment
evaluation. Protecting the reputation of Tata Steel and the wider Tata
Group is an integral part of this.
INTERNAL CONTROL SYSTEMS:
In Tata Steel India, the Corporate Audit division continuously monitors the
effectiveness of the internal controls with an objective to provide to the
Audit Committee and the Board of Directors, an independent, objective and
reasonable assurance of the adequacy and effectiveness of the
organisation's risk management, control and governance processes. The
division also assesses opportunities for improvement in business processes,
systems & controls; provides recommendations, designed to add value to the
organisation and follows up on the implementation of corrective actions and
improvements in business processes after review by the Audit Committee and
Senior Management.
The scope and authority of the Corporate Audit division is derived from the
Audit Charter approved by the Audit Committee. The Charter is designed in a
manner that the Audit Plan is focused on the following objectives:
* All operational and related activities are performed efficiently and
effectively.
* Significant financial, managerial and operating information that is
relevant, accurate, and reliable is provided on time.
* Review of identification and management of Risks.
* Resources are acquired economically, used efficiently and safeguarded
adequately.
* Employees' actions are in accordance with the Company's policies and
procedures, Tata Code of Conduct and applicable laws and regulations.
* Significant legislative and regulatory provisions impacting the
organisation are recognised and addressed appropriately.
* Opportunities identified during audits, for improving management control,
business targets and profitability, process efficiency and the
organisation's image, are communicated to the appropriate level of
management.
* Shareholders' and other Stakeholders' wealth and welfare are preserved,
protected and enhanced.
Corporate Audit division develops an annual audit plan based on the risk
profile of business activities of the organisation and the business
activities are prioritised for audit accordingly. The audit plan is
approved by the Audit Committee which regularly reviews the compliance to
the plan.
During the year, the Audit Committee met regularly to review the reports
submitted by the Corporate Audit Division. All significant audit
observations and follow-up actions thereon were reported to the Audit
Committee.
The Audit Committee also met the Company's Statutory Auditors to ascertain
their views on the financial statements, including the financial reporting
system, compliance to accounting policies and procedures, the adequacy and
effectiveness of the internal controls and systems followed by the Company.
The Audit Committee's observations and suggestions were acted upon by the
Management.
In Tata Steel Europe, The Board of directors is responsible for TSE's
system of internal control and reviewing its effectiveness. The company has
a well-established internal audit function that reports to the Director
Finance on a day-to-day basis and has direct access to the chairman of the
Audit committee, who meets with the Director Audit several times each year.
The Audit committee receives reports from the internal audit function four
times a year and also considers the terms of reference, plans and
effectiveness of the function. The internal audit function works closely
with the external auditors. It provides independent and objective assurance
to the Board, the Audit committee and the Executive committee on the
systems of internal control employed in the Group, and provides a
systematic, disciplined approach to evaluating and improving the
effectiveness of risk management, control and governance procedures.
There were no changes in internal control over financial reporting that
occurred during the period under review that have materially affected, or
are reasonably likely to materially affect, internal control over financial
reporting.
TSE's system of internal control has been designed in order to provide the
directors with reasonable assurance that its assets are safeguarded, that
transactions are authorised and properly recorded and that material errors
and irregularities are either prevented or would be detected within a
timely period.
HUMAN RESOURCES AND INDUSTRIAL
RELATIONS:
Tata Steel Group recognises people as the primary source of its
competitiveness, and continues to focus on people development by leveraging
technology and developing a continuously learning human resource base to
unleash their potential and fulfill their aspirations.
The company is on a growth path along with the domestic steel and mining
industry and rise in competition. The human resources team has been
continually focusing on the means to achieve the company's goals of meeting
such growth targets through external recruitment & right skilling and by
improving the capabilities of existing people through people development
initiatives.
With the expansion plans of Tata Steel at Jamshedpur by another 2.9 mtpa by
2012, there was an increased need of highly skilled and qualified workforce
to support construction & quick ramp up of the new technology plants. One
of the key challenges, therefore, was to build the capability of its
existing workforce to meet the higher level skill requirements. Tata Steel
geared up to meet the challenge of growth by recruiting technically
qualified persons and maximising utilisation of the existing employees
through instituting programs to right skill them and improve the overall
skill mix of employees. A focused training & development approach was
adopted to achieve this task.
As a result of such focused approach, there has been a significant increase
in the percentage of skilled employees and also a simultaneous increase in
the workforce. The employees' strength in Indian operations increased to
34,912 as on 31st March, 2011 as against 34,440 as on 31st March, 2010.
Major highlights of the people development process in Tata Steel India
during the financial year under review were:
* 70:20:10 framework for Learning and Development was expanded to a much
larger number of officers. This approach has greater focus on on-the-job
and coaching and mentoring components of leaning.
* In an effort towards building a culture of coaching & mentoring, over 600
officers were trained in several batches of workshops through internal &
external faculty.
* Focus on wider coverage for class room training (Percentage of unique
officers trained increased from 41% in FY 10 to 70% in FY 11) which
included some unique offerings of programs for different customer segments
like laterals, lady officers, etc.
* Train maximum possible people on TQM.
* Over and above the normal training for employees, close to about 1000
persons recruited for the 2.9 mtpa expansion have been provided induction
training.
* On skill development front, focus has shifted towards more hands on
training. Many of the programs were restructured keeping in view the needs
of tomorrow.
* Introduction of 'Value Education' for the young recruits. To create fun
at work environment functions like Technical Exhibition for all cadre
trainees, 'Parichay' for fresh MTTs, 'Varshikotsav' for fresh TAs and
'FROLICA' to celebrate mentors day have been organised.
Two initiatives were undertaken principally to improve the HR practices of
the company:
* Employee Connect Program (ECP): An Initiative to build employee connect,
understand concerns and follow up action plans. Employees from across
levels and Business areas have been met individually on a monthly basis to
gauge engagement levels and to understand concerns.
* Job Rotation & Career Planning (JRCP): An Initiative to provide career
opportunities for officers through planned movement across functions and
also to build functional expertise in the organisation. In FY 2010-11 19%
of all Lateral movements were through JRCP and this process is being
further strengthened in FY 2011-12.
Tata Steel India reached the milestone of 82 years of industrial harmony
and peace. During the financial year 2010-11 industrial relations remained
normal at all locations. Market based new wage series (lower than the
existing wage series but higher than the market median) was introduced
after arriving at a settlement with the Union during FY 2010-11. All the
new recruitment for the expansion units have been done in the new series of
wages.
The European operations have not experienced any significant industrial
relations problems during the year. The number of employees in TSE at the
end of March 2010 was 34,200 as compared to 35,400 on 31st March 2010. The
reduction mainly resulted from restructuring measures taken during the
economic downturn.
Following the failure in 2009 of four international slab buyers to fulfil
their obligations under a ten-year Offtake Framework Agreement, TCP's
Redcar blast furnace and Lackenby steelmaking facilities were partially
mothballed in March 2010 (with the loss of around 1,350 jobs), while TSE
explored options for a long-term solution for the future of these
facilities. In February 2011 an agreement was signed to sell certain assets
of TCP to SSI. The assets covered by the sale included the Redcar blast
furnace, the Redcar and South Bank coke ovens, TCP's power generation
facilities and sinter plant, and the Lackenby steelmaking and casting
facilities. The deal also included TSUK and SSI entering into a joint
venture to operate Redcar wharf, TCP's bulk terminal. The sale was
completed on 24th March, 2011. Approximately 850 employees transferred to
SSI and it is expected that further jobs will be created. The Group also
remains committed to the region, employing more than 1,800 people in
operations at Hartlepool, Skinningrove, the Teesside beam mill and the
Teesside Technology Centre.
UK Steel Enterprise Limited ('UKSE'), the Company's subsidiary that helps
the economic regeneration of communities affected by changes in the steel
industry, delivered a package of support measures in the wake of the job
losses at Teesside, including grant and loan funding for over one hundred
new businesses in the region and an expansion of The Innovation Centre on
Hartlepool's Queens Meadow Business Park. Additional funding has been
provided to a variety of businesses across all steel areas of the UK to
help them create new job opportunities for steel communities.
TSE has two major pension schemes viz., The British Steel Pension Scheme
(BSPS) in the UK and the Stichting Pensioenfonds Hoogovens (SPH) at the
Netherlands where the members along with the company contribute to meet the
cost of future service benefits subject to review at the future actuarial
valuations.
STATUTORY COMPLIANCE:
The Managing Director makes a declaration at each Board Meeting regarding
the compliance with provisions of various statutes after obtaining
confirmation from all the units of the company. The Company Secretary
ensures compliance with the SEBI regulations and provisions of the Listing
Agreement. The Group Chief Financial Officer as the Compliance Officer
ensures compliance with the guidelines on the insider trading for
prevention of insider trading.
CAUTIONARY STATEMENT:
Statements made in this report describing the Company's objectives,
projections, estimates, expectations may be 'forward-looking statements'
within the meaning of applicable securities laws and regulations. Actual
results could differ materially from those expressed or implied. Important
factors that could make a difference to the Company's operations include
economic conditions affecting demand/supply and price conditions in the
domestic and overseas markets in which the Company operates, changes in the
Government regulations, tax laws and other statutes and incidental factors. |