Financial Daily from THE HINDU group of publications
Thursday, May 06, 2004
Magna Electro Castings devises `metal price index'
Coimbatore , May 5
MAGNA Electro Castings Ltd (MECL), which manufactures iron castings and steel components, has developed a `metal price index' that reflects the price of key raw materials and serves as a benchmark to fix the price of finished goods.
The company claims to be the first foundry unit in the region to formulate such an index that gives an authentic data to the buyers to know the reasons for price revision.
MECL is hiking capacity utilisation to reach the maximum licensed capacity and fortified by a Quality Certification from TUV, is making a foray into the European markets.
Speaking to Business Line here on Wednesday, Mr N. Krishna Samaraj, Managing Director, MECL, Coimbatore, said the company has worked out a `metal price index' based on which pricing is settled with both domestic and foreign buyers. It took him 6-8 months to make the customers agree to the concept that is mutually beneficial.
He said the index is linked to the price of key inputs pig iron and scrap. But customers are not willing to consider other inputs like power and employee cost. He said MECL is probably the first foundry unit in the region to come out with a scientific formula for pricing to tide over the fluctuation in iron and steel prices. Though initially apprehensive about buyers' response, he said he is happy to find all the customers working on the price index.
Mr Krishna Samaraj said the company was in the process of installing furan-bonded moulds to produce bigger castings in an automated system. At present, castings up to 25 kg are produced using automated system while bigger castings are produced manually.
The installation of the new equipment imported from IMF, Italy, would enable it to produce castings up to 500 kg in the automated line. Since bigger castings are less in volume, they would be produced manually. The investment for this project to be commissioned in July is around Rs 2.5 crore. He said as part of efforts to become self sufficient in energy in the next three years, the company has planned to generate power through windmills.
The location of the wind farm, estimated cost, etc. were still to be finalised but said the wind farm would have a total capacity of 5 MW. The company is also working on an alternative fuel system like using LPG to reduce power cost.
Mr Samaraj said he expected a near 30 per cent growth in turnover during 2003-04 compared to Rs 17.84 crore sales recorded in 2002-03. He was confident of maintaining the sales growth percentage during the current year too.
As part of a planned strategy, the company reduced the percentage of exports mainly to the US from 70 per cent in 2002-03 to 50 per cent in 2003-04 with the balance production being absorbed by the domestic market. In the current year, he expected exports to the US coming down to 40 per cent with Europe taking a 10 per cent share with the rest being sold in the domestic market.
But in volume terms, there would be no impact due to reduced exports to the US in percentage terms since the capacity utilisation has gone up from 300 tonnes a month to 450 tonnes now and by the last quarter of current FY, the capacity utilisation would reach the full-licensed capacity of 600 tonnes a month.
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