VISA Steel Limited Annual Report 2007-08

27% revenue growth.96% PBT growth. 110%PAT growth.RISK MANAGEMENTYour Company has identified the major thrustareas to concentrate on, which it believes tobe critical to achievement of organisationalgoals. A well defined structure has beenlaid down to assess, monitor and mitigaterisks associated with these areas, brieflyenumerated below:a) Project implementation – Project status ismonitored on a regular basis by the projectmanagement team to counter slippages andreviewed on a monthly basis by the executivemanagement. Consultants are presenton-site for mitigating contingencies on theimplementation front. Necessary coveragehas been taken in the form of an extensiveErection All Risk Policy.FINANCE REVIEW AND ANALYSISYour Company reported a revenue of Rs. 6,828.1 million, registering a 27% increase over 2006-07and Rs. 431.5 million in profits after tax, an increase of 110% over 2006-07. Your Company hasposted an EBITDA of Rs. 939.3 million in the year 2007-08, an increase of 103% from the year2006-07.HIGHLIGHTSb) Foreign Exchange – Your Company dealsin sizeable amount of foreign exchange inimports of capital items and raw materialsand exports of finished products. Necessaryguidance is provided by the forex consultanton mitigating foreign exchange exposure.c) Systems – Your Company hasimplemented SAP, the leading software forEnterprise Resource Planning, to integrateits operations and to use best business andcommercial practices. Your Company hasappointed a support partner for smootherstabilisation & to derive significant benefitsfrom SAP.d) Statutory compliances – Procedure is inplace for monthly reporting of complianceof statutory obligations and reported to theBoard of Directors at its meetings.Rs. Million2007-08 2006-07 Change %Net Sales / Income from Operations 6,807.65 5,311.80 1495.85 28.16Other Income 20.40 67.48 (47.08) (69.77)Total Income 6,828.05 5,379.28 1448.77 26.93(Increase) / decrease in stock (871.96) 301.06 (1173.02) (389.63)Raw Materials consumed 2,741.53 1,837.96 903.57 49.16Purchase of Trading Products 2,977.38 2,280.93 696.45 30.53Employee Cost 140.16 50.61 89.55 176.94Other expenses 901.66 445.08 456.58 102.58Operating Profit 939.28 463.64 475.64 102.59Interest (Net) 85.34 22.92 62.42 272.34Depreciation 182.59 97.67 84.92 86.95Profit before Tax 671.35 343.05 328.30 95.70Provision for Tax 239.87 137.84 102.03 74.02Profit after Tax 431.48 205.21 226.27 110.26Sales & Other IncomeSales were primarily driven by the Cokeand Ferro Chrome business on the back ofimproved volumes and better realisationsinspite of lower pig iron volumes. OtherIncome constitutes mainly income from saleof scrap, DEPB licence, foreign exchangegain, receipt of insurance claim proceeds,etc.Purchase of Traded ProductsPurchase cost of traded goods increasedon account of increase in prices, despitedecrease in volumes compared to theprevious year.Raw materials consumed,Employee Cost and OtherExpensesRaw material consumption increased by49.16% due to production volumes andimproved productivity . Employee costincreased due to rise in manpower strengthfor the expanding facilities. Other expensesincreased with more manufacturing facilities.Interest ChargesThe net interest charges increasedsubstantially during the year due to increasedterm loan and working capital interest onaccount of commencement of additionalmanufacturing facilities and operations andreduced interest income earned on fixeddeposits with banks.DepreciationDepreciation increased significantly duringthe year mainly due to commissioning of theFerro Chrome Plant.Profit after TaxPAT improved on account of improvedperformance of the Coke Oven and FerroChrome Plants and the captive use of themajority of the coke production facilitatedimprovement in margins. PAT was adverselyimpacted by the incidence of deferred taxprovisions due to addition of fixed assets.Cash ProfitCash profit improved substantially by 87%,during the year to Rs. 792.12 million from Rs.423.7 million in the year 2006-07 on accountof improved performance of Coke Oven,Ferro Chrome and trading operations.BALANCE SHEET ANALYSISFixed Assets & InvestmentsYour Company made major commitmentsduring the year on account of capitalexpenditure for the Sponge Iron Plantand Power Plant, which are reflected asCapital WIP in the Fixed Assets Schedule.Your Company has been jointly allotted thePatrapada coal block in Talcher, Orissa,through a joint venture company, PatrapadaCoal Mining Company Private Limited. Asreported last year, your Company has a89 per cent controlling stake in GhotaringaMinerals Limited, which plans to developa chrome ore deposit in Orissa and withwhom your Company had entered into along term agreement for securing its ChromeOre requirements. Your Company has alsoentered into a Joint Venture Agreementwith Baosteel Resources Co. Ltd. and VISAComtrade AG for setting up a 100,000 TPAFerro Chrome Plant.InventoriesInventory of raw materials went up duringthe year due to increased Coke Oven &Ferro Chrome operations and also due tobulk purchase of imported coke and cokingAnnual Report 2007-0845