The global steel industry continued to show strong growth in Q4 FY2011 with crude steel production of 374.5 million MT, an increase of 9.7% compared to Q4 FY2010. Global crude steel production in FY2011 was 1,446.6 million MT, a growth of 12.4% compared to FY2010. Although steel production was strong early in FY2011, growth moderated in the middle of the year and picked up again in Q4 FY2011. Steel production growth in Q4 FY2011 on a sequential quarter basis was 7.6%.
Growth in the steel industry remains significantly diversified across regions. During Q4 FY2011, Asia produced 240.5 million MT of crude steel, an increase of 10.5% over the Q4 FY2010 (with growth in India and China of 6.5% and 10.9%, respectively). North America"s crude steel production during this period was 28.9 million MT, 6.0% higher than the prior year. Steel production growth in the EU and South America was 6.9% and 12.2% respectively, for Q4 FY2011 as compared to the prior year. Global capacity utilization in the steel industry increased significantly to an average of 82% in Q4 FY2011 as compared to an average of 75% in Q3 FY2011.
Crude oil prices have been steadily rising over FY2011 and have increased by approximately 37% since April 2010. This rise in crude oil prices, in addition to an increase in coal prices, has put upward pressure on key input costs.
Consolidated Full Year FY2011
FY2011 Gross Sales increased by 7.7% compared to the same period last year. This increase was primarily due to steady sequential volume growth during the first three quarters of the year. Gross Sales were positively impacted by strong growth in the global steel industry but were offset to some extent by moderating electrode prices during the year.
Sales volumes in FY2011 increased by 25% compared to the prior year due to strong growth in both the Indian and German operations. Volume growth was offset to some extent by a decline in Q4 FY2011 on a sequential quarter basis. This decline was due to some deferred shipments during Q4 FY2011.
FY2011 Operating Profit declined by 20.0% compared to the previous year. This decline was due to a combination of moderating electrode prices and higher input costs during the year. Costs were primarily impacted by increases in raw material, energy and labour related expenses. Graphite India continued to improve productivity and operational efficiencies across its manufacturing units, which benefited margins.
Higher production and capacity utilization also resulted in better allocation of overheads. Graphite electrode production in FY2011 increased by 42% compared to FY2010. Average capacity utilization in FY2011 was 73%, up from 52% in FY2010.
FY2011 Net Profit declined by 19.5% as compared to the previous year. This was primarily due to a decrease in Operating Profit and a one-time payment under the voluntary retirement scheme at Bangalore, which will help the Company improve its cost competitiveness. A significant decrease in interest expense during the year from Rs. 15 Crore in FY2010 to Rs. 8 Crore in FY2011 positively impacted Net Profit.
The non-electrode segments performed well during FY2011. The Power and Steel segments experienced significant Net Sales growth of 20.5% and 16.7%, respectively. Growth in the Power segment was driven by increased hydro-electric power generation. The Steel segment experienced strong growth due to increased demand from the auto and manufacturing sectors. This growth was offset to some extent due to a lockout of the steel plant during most of March 2011.
Graphite India continues to maintain strong liquidity on its balance sheet. Net debt remained relatively steady and increased from Rs. 60 Crore in FY2010 to Rs. 73 Crore in FY2011. The Company also redeemed or converted all outstanding FCCBs during the year.
Standalone Q4 FY2011 ...
Q4 FY2011 Gross Sales declined by 9.2% compared to Q4 FY2010 and 9.5% compared to Q3 FY2011. This was due to a combination of lower volumes and moderating electrode prices. Sales volumes were impacted due to some deferred shipments during Q4 FY2011.
Gross Sales in Q4 FY2011 were also impacted by lower production in the Steel segment. Q4 FY2011 Operating Profits declined by 24.7% compared to Q4 FY2010 and 1.7% compared to Q3 FY2011. This was due to a combination of lower volumes, moderating electrode prices and higher input costs during the quarter. Average capacity utilization increased from 84% in Q3 FY2011 to 91% in Q4 FY2011.