Tata Steel
BSE: 500470 | NSE: TATASTEEL | ISIN: INE081A01012 | Steel - Large
- Directors Report
- Chairman's Speech
- Auditors Report
- Notes To Accounts
- Accounting Policy
- Finished Products
- Raw Materials
| Chairman's Speech | Year : Mar '09 |
Dear Shareholder,
Global Meltdown
After decades of global growth, the world watched in horror as
financial institutions collapsed, first in the United States followed
by Western Europe and the United Kingdom. The crisis then spread to
nations in Eastern Europe, Asia and other geographies. This global
meltdown had a widespread and devastating effect on the world-wide
banking system, stock markets, pension funds, individualsnet worth and
ownership of assets. It was a financial crisis of proportions
approaching that at the time of the Great Depression of 1929.
In their efforts to restore fiscal stability and credibility of
thebanks,vanongovernments stepped in with financial packages to assist
banks and other financial institutions, with a view to normalising the
financial sector. However,
in most cases, these funds were used by the receiving institutions to
shore up their own balance sheets, and very little reached the real
economy
The resultant lack of liquidity in the market, resulted in the drying
up of consumer credit and working capital, leading to an unprecedented
reduction in demand and the consequent inability of companies to
finance their operations. This led to a domino-effect downward spiral
in various industrial sectors like construction, automobiles, consumer
products and capital goods. The effects of this downturn were
initially felt in the industrialised nations but spread quickly to most
other countries around the world.
The global downturn also had a major effect on various industries
dependant on steel. Major contraction in the construction projects,
automobiles, white goods demand from the third quarter of 2008-09
resulted in the global demand for steel dropping by 21% compared to the
level consumed in the same quarter of the previous year.
While the economic scenario in India may look similar to that in the
West, the situation was entirely different. Unlike the international
banks and financial institutions, Indian banks did not hold toxic paper
nor had they invested in sub-prime assets. Their loan portfolios were,
by and large, healthy. What did happen was that in June 2008, the
Reserve Bank of India raised the Repo Rates and the Cash Reserve Ratio
of the banks, consciously curtailing liquidity in the system to combat
inflation which had reached a level of around 11%. Predictably, the
economy began to slow down in several sectors. The corporate sector
and particularly small businesses increasinglyfaced difficulties in
running their businesses, due to the lack of available finance and
credit facilities. GDP growth declined from a level of 9% to 6.7% as
new investments were deferred and output fell.
The situation was compounded when, as a result of the financial crisis
in Western Europe and the United
States,foreignfinancialinstitutionsandforeign investors hurriedly
liquidated their investments in India, leading to the collapse of
Indian stock prices. Therefore from the second half of 2008-09 Indian
industry was constrained to operate with very limited access to working
capital, an inability to raise funds from market sources and a drastic
drop in consumer demand.
The good news is that the economic revival in India is beginning to
take place faster than most people expected and with the new
governments plans for increased spending in infrastructure as well as
rural development, the recovery in India is expected to be robust. Many
believe the US economy has bottomed out, but that UK, Europe and Russia
may fall still further. The general view is that an economic recovery
in the Western world would probably only be in late 2010.
Tata Steel
The effects of the world economic downturn seriously impacted our
Companys global operations in the second half of the year under
review. The demand for steel declined by 26% in the UKand Europe in the
third quarter compared to a year earlier and after a further
contraction in the fourth quarter, demand had fallen by 57% in the UK
and 44% in Europe compared with a year ago. This reflected in a sharp
downturn in private construction projects, as well as large falls in
automotive and mechanical engineering, amplified by severe destocking
by both end users and service centers. Indian operations witnessed a
less pronounced drop in demand of 11% in the third quarter, reflecting
the reduced activity in infrastructureand commercial vehiclesJhereare
however signsthattheinfrastructureand road building activities in India
are gaining momentum, as a result of some of the governments actions
to revive the economy.
Tata Steel has taken aggressive steps to meet the challenges of these
difficult times through major initiatives in cost reduction, process
improvement and production rationalisation. The highest priority is
being given to expanding steel producing capacity in Jamshedpur, and
ensuring raw material security for the European operations which do not
have captive iron ore and coal resources. Production rationalisation is
also being undertaken in Europe and the UK to right-size manufacturing
facilities to be in sync with the lower off-take by the market. The
same approach is also being taken in the Companys Asian subsidiaries.
The past year and probably the next 12-18 months are likely to be
difficult and challenging times for Tata Steel. However, the spirit of
the Companys employees, coupled with their commitment to meet the
challenges, I am sure, will see Tata Steel come out of this difficult
period, as a more cost-effective steel manufacturer with a stronger
global market presence and an enhanced capability in producing new
grades of steel products to better serve its customers.
In ending I would like to thank all my colleagues and our unions at
Tata Steel for their support and understanding through the year. They
have collectively made the Company what it is today, and will help lead
the Company into tomorrow. I would also like to thank our shareholders
for the trust they have reposed in the Company over the years.
Chairman
Mumbai, 31st May, 2009 |
|
![]() | |
| Source : Religare Technova | |
![]() | |




Online


