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Rashtriya Ispat Nigam Ltd (RINL), or Vizag Steel Plant, is looking to turn EBITDA positive by the end of the current fiscal.
According to P Madhusudan, CMD, RINL, while on a cumulative basis the company’s margin is still negative, it has been able to register positive EBITDA for July.
Improved margins “We hope to turn EBITDA-positive by the end of current financial year,” Madhusudan told a media gathering here on Monday.
EBITDA losses have narrowed from ₹790 crore in 2015-16 to ₹264 crore in 2016-17. The company would have been able to turn EBITDA-positive in the last fiscal had there not been a spike in the price of coking coal, he said.
The expansion and modernisation programme undertaken by the company will help achieve economies of scale, bring down costs and help the company return to profits in FY19, he said.
RINL’s losses narrowed to ₹1,236 crore in 2016-17 against a net loss of ₹1,421 crore in 2015-16.
Post modernisation, its production capacity would increase to 5.4 million tonnes (mt) by the end of this fiscal, from the current 4.1 mt. The company plans to scale up its production capacity to 6.3 mt in 2018-19 and a little over 7 mt in 2019-2020.
Stable prices Steel prices have been firming up globally and there is an upward trend in the domestic market also, he said.
RINL raised prices of 4-5 per cent in the January-March quarter of FY17. However, prices were revised downwards in the first quarter of the current financial year on account of poor volume sales following a disruption in trade channels in the run-up to the implementation of GST.
“The demand side looks encouraging as of now. Prices remained stable in July, and August onwards our realisations have improved by 4-5 per cent,” he said.
Cost Control Madhusudan said RINL would tread cautiously on adding manpower. The company currently employs around 18,000 people and this number is not expected to move up significantly even while it adds capacity and raises its production target to 7 mt in 2020.
Employee cost accounts for nearly 19 per cent of total expenses, he said. The focus would be on improving productivity.
“We might need frontline executives and some people in the technical field for our capacity addition. We want to bring down our employee cost to 12 per cent,” he said.
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