100th Annual Report 2006-2007 - Tata Steel

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Management Discussion and Analysis iron ore leases to the Government and the approval process is in progress. The Company is also pursuing setting up integrated steel plants in Chhattisgarh and Jharkhand in phases in the future. c) Other Projects in India The Company is setting up a 1.6 million tonne metallurgical coke making facility in Haldia to support future enhanced coke requirement in Jamshedpur. The project cost is estimated at Rs. 1,150 crores and will be commissioned by March 2008. The Company has acquired requisite land, completed civil work and placed orders for major equipments. 2. Primary steel making in countries rich in Iron Ore and / or Coal / Gas The Company believes in a de-integrated production philosophy to maximise value in the steel industry. The Company has identified possible locations to set up primary steel making facilities in the long term. These locations (including India) are attractive by virtue of competitive factors of production i.e. availability of raw material, energy sources etc. The Company intends to link low cost steel production facilities with the most favourable steel consuming markets, to maximise value creation across the entire value chain. The Company intends to have a balance between the growing markets of the developing countries and the mature markets with high end products and technology. Investments in NatSteel Asia Pte. Ltd. and Tata Steel (Thailand) Public Co. Ltd., (erstwhile Millennium Steel) were steps taken in this direction. 3. Overseas acquisitions in growing and mature markets For long, the steel industry has been plagued with the issues of cyclicality, pricing and demand-supply gap. The steel industry is highly fragmented and the top 5 steel producers control less than 20% of market share in the world. However, the mining companies, who are suppliers of raw materials viz. iron ore and coal to the steel companies and the automobile companies, who are the major customers of the steel companies are highly consolidated in their respective sectors. Consolidation in the steel industry is likely to address the issues of price stability, foster further focus on technology and innovation to enable the industry to serve its customers better with new product offerings and better supply chain efficiencies. The global steel industry has started witnessing consolidation moves in the last few years but these were largely focused on regional consolidation (see chart below). It is expected that the industry would witness increased pace of cross border consolidation in the next few years. Shares of the Top Five Players in each Region (%) NORTH AMERICA EU 15 CHINA LATIN AMERICA ASIA (excluding China) WORLDWIDE SHARE OF THE TOP FIVE GLOBAL PLAYERS 94 60 50 40 30 20 10 0 1995 32.1 2000 32.1 47.6 55.5 2005 2006E 70 60 50 40 30 20 10 0 1995 43.3 2000 58.6 58.9 61.3 2005 2006E 40 35 30 25 20 15 10 5 0 1995 34.6 35.7 19.7 24.5 2000 2005 2006E 90 80 70 60 50 40 30 20 10 0 1995 53.7 2000 57.7 80.1 80.1 2005 2006E 60 50 40 30 20 10 0 54.7 54.7 1995 46.1 2000 47.3 2005 2006E 20 16 12 8 4 0 1995 12.9 2000 14.6 2005 17.9 2006E 20.0
I. Strategic Rationale for acquisition of Corus The Company’s investment in Corus Group plc (which was completed in April 2007) is consistent with the Company’s stated objective of growth and globalisation. Post Corus acquisition, Tata Steel is the sixth largest steel producing company in the world with a steel making capacity (crude) of around 28 million tonnes. Corus is Europe’s second largest and the ninth largest steel producer in the world and produced 18.3 million tonnes of crude steel in 2006. Corus has crude steel production capacity of 21.2 million tonnes in UK and Netherlands. Corus also has downstream manufacturing facilities in Germany, France, Norway and Belgium. In the UK, Corus has a 14.4 million tonne capacity - Port Talbot (4.7 million tonnes), Scunthorpe (4.5 million tonnes), Teesside (3.9 million tonnes) and Rotherham (1.3 million tonnes). The Ijmuiden plant in Netherlands has a crude steel capacity of 6.8 million tonnes and is also one of the lowest cost producers of steel in the Western Europe. Corus is one of the leading suppliers of steel to the automotive, construction, packaging, engineering, rail, aerospace, metal goods, and oil and gas industries. Corus has a strong Research and Development capability which focuses on continuous improvement in manufacturing processes and development of high value added steel products. Through the acquisition of Corus, Tata Steel would also have a presence in the developed markets of Europe, have access to the strong product portfolio and research and development facilities in Corus. The combined businesses of Tata Steel and Corus will be driven by a common vision and strategy to cater to the requirements of the global customers from its worldwide operations. The steel industry is also undergoing structural changes and increased consolidation in the steel sector is likely to result in a re-rating of the industry in the near future. II. Valuation of Corus Group plc The Enterprise Value (EV) of the Corus acquisition was around Rs. 59,850 crores (USD 13.75 billion), which includes its continuing debt of Rs. 3,700 crores (USD 0.85 billion). The Enterprise Value/tonne of the Corus acquisition works out to around Rs. 32,700/tonne (USD 751/tonne) based on Corus’ actual crude steel production of 18.3 million tonnes in 2006 and Rs. 28,250/ tonne (USD 649/tonne) based on its crude steel capacity. III. Integration of overseas acquisitions a) Integration of Corus and Tata Steel The Integration philosophy of the Tata Steel Corus combine is premised on the strong cultural fit and corporate governance practices of the two companies. To facilitate integration and create a virtual organisation across the combined businesses, a Strategic and Integration Committee (SIC) has been formed with Mr. Ratan Tata as the Chairman, Mr. B. Muthuraman, Mr. Philippe Varin, Dr. T. Mukherjee, Mr. Rauke Henstra, Post the Corus acquisition, Tata Steel is the sixth largest steel producing company in the world with a steel making capacity (crude) of 28 million tonnes. 95
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A Century of Trust 100th Annual Rep
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Tata Steel is Asia’s first and In
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Redefining steel with world-class p
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in a manner that ring-fences the Co
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Board of Directors Mr. R. N. Tata C
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The state-of-the-art Hot Strip Mill
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Distribution of Revenue 2006 - 2007
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1907-2007 JRD Tata with Pandit Jawa
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1907-2007 Tata Steel’s state-of-t
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This photograph taken by a Tata Ste
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Profit Sharing Bonus was granted fo
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A modern swimming pool at the G Tow
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steeljunction in Kolkata - India’
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Tata Steel has introduced high-end
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Tata Structura is a new-age constru
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Shareholder interaction at an Annua
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Within three weeks of the announcem
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It was 1956. The company was faced
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Community and environment : Improvi
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A Critical Care Unit, in the 850-be
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The Tata Steel Family Initiatives F
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The Tata Steel works, mines, collie
Page 45 and 46: An aerial view of the planned indus
Page 47 and 48: The Cold Rolling Complex at Jamshed
Page 49 and 50: 1933 Two new roughing and finishing
Page 51 and 52: From the early days, the Tata Steel
Page 53 and 54: Production Highlights • The best
Page 55 and 56: Aspire with T3 With the objective o
Page 57 and 58: Operational Highlights NSA increase
Page 59 and 60: was above the average total score o
Page 61 and 62: Blast furnaces at Corus’ integrat
Page 63 and 64: Corus produces strong, light steel
Page 65 and 66: Corus is British Triathlon’s main
Page 67 and 68: Review of Corporate Sustainability
Page 69 and 70: TSRDS focused on popularising repro
Page 71 and 72: Centenary Year The founder, Jamsetj
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Page 75 and 76: convertible preference shares and a
Page 77 and 78: expansion of crude steel making cap
Page 79 and 80: The bulk cargo berths are being des
Page 81 and 82: Corporate Governance Pursuant to Cl
Page 83 and 84: Annexure 'A' to Directors’ Report
Page 85 and 86: Form - B Form for disclosure of par
Page 87 and 88: 6 am 2 pm 12 noon 10 am 8 am 8 pm 6
Page 89 and 90: Particulars of technology imported
Page 91 and 92: Management Discussion and Analysis
Page 93 and 94: of 8%. In 2006, China produced 422.
Page 95: The Company plans to achieve these
Page 99 and 100: Steelium (India’s first branded c
Page 101 and 102: The “G” Blast Furnace in Jamshe
Page 103 and 104: Sales of manganese ore in the domes
Page 105 and 106: d) Payments and Provisions to Emplo
Page 107 and 108: m) Stores and Spare Parts and Stock
Page 109 and 110: The Company generated EVA of Rs. 2,
Page 111 and 112: Business and Operational Risk The m
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Page 115 and 116: Highlights 2006-07 2005-06 Rupees R
Page 117 and 118: Auditors’ Report TO THE MEMBERS O
Page 119 and 120: (b) In our opinion and having regar
Page 121 and 122: (xii) In our opinion and according
Page 123 and 124: Profit and Loss Account for the yea
Page 125 and 126: Cash Flow Statement for the year en
Page 127 and 128: Schedule forming part of the profit
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Page 143 and 144: SCHEDULE M : NOTES ON BALANCE SHEET
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SCHEDULE M : NOTES ON BALANCE SHEET
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Balance Sheet Abstract and Company'
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CAPITAL ACCOUNTS Financial Statisti
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Financial Ratios 2006-07 2005-06 20
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Name Category No. of Whether No. of
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the Tata Code of Conduct, which req
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Shareholding of the Directors in th
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Committees In addition to the above
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employees to report concerns about
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Market Information Market Price Dat
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Distribution of Shareholding Number
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Address for Correspondence : Tata S
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Certificate To the Members of TATA
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Statement pursuant to Section 212(8
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4. Subject to the matters referred
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Consolidated Profit and Loss Accoun
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Consolidated Cash Flow Statement fo
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Schedule forming part of the Consol
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Schedules forming part of the Conso
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SCHEDULE N : NOTES TO THE CONSOLIDA
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The Dimna reservoir near Jamshedpur
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100th Annual Report 2006-2007 - Tata Steel

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