Steel Industry Cost Structure_Project Presentation

7/31/2019 Steel Industry Cost Structure_Project Presentation

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A STUDY OFSALES TREND AND COSTSTRUCTURE OF INDIAN

STEEL INDUSTRY

Presentation prepared by

G.BhavaniMT(F&A), 119931


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ABOUT THE INDUSTRY

The Indian Iron and Steel industry 38 million

tons per annum is the eighth largest in world.The Iron and Steel industry in India is organizedin three categories viz: main producers, othermajor producers and the secondary producers.

The main producers and other majorproducers have integrated steel making facilitywith plant capacities over 0.5 MT and utilize ironore and coal/gas for production of steel. In 2004-

05, the main producers i.e. SAIL, TISCO andRINL had a combined capacity of around 19.3 MTand capacity utilization was 104 percent.


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The other major producers comprising of ESSAR, ISPATand JVSL had a capacity of 6.4 mT with capacityutilization of 97 percent.

The secondary sector is dispersed and consists of :

(a) Backward linkage from about 120 sponge ironproducers that use iron ore and non coking coal, with acapacity of around 13 MT, providing feedstock for steelproducers. The capacity utilization in 2004-05 was 75

percent.(b)About 650 mini blast furnaces, electric arc furnaces,induction furnaces and energy optimizing furnaces thatuse iron ore, sponge iron and melting scrap to producesteel. Their capacity is around14.7 MT, and capacity

utilization in 2004-05 was 58 percent.(c)Forward linkage with about 1200 re-rollers that roll outsemis into finished steel products for consumer use.These are small and medium enterprises, whose reportedcapacity is around 15 MT and capacity utilization in 2004-

05 was 55 percent.


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BJECTIVES OF THE STUDY

. To analyze the cost structure of thecompanies to find out the mostinfluential factor in cost structure.

. To study sales trend analysis of thecompanies.

. To summarize the main findings ofthe study.


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SAL ES ANAL YS

0.0

100.0

200.0

300.0

400.0

500.0

600.0

2000- 01 2001- 02 2002- 03 2003- 04 2004- 05

YEA R

RINL

SA IL

TISCO

ISPAT

JVSL


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Sales trend of units under study showeda fluctuating trend. RINL,SAIL and JVSLindicate an increasing trend throughout

the study period. TISCO And ISPATindicated a fluctuating trend. The averagetrend of units under study was 168.8.While the average trend of JVSL was

higher than this, on the other hand RINLand ISPAT trend were closure to averagetrend, SAIL and TISCO trend were lowerthan the average of units under study.

The standard deviation figure shows ahigh fluctuation in trend value of all theunits under study.


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RA W M AT ERIAL & STORES AN

0.0

10.0

20.0

30.0

40.0

50.0

60.0

70.0

2000- 01 2001- 02 2002- 03 2003- 04 2004- 05

YE A

RINL

SA IL

TISC

ISPA

JVSL


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Analysis Table-2 indicates the percentage of rawmaterials and stores cost to sales. The cost

showed a fluctuating trend in all units understudy. The average raw material cost of entirestudy was 39.4 percent, where as the averageraw material cost of ISPAT and JVSL was 46.6

percent, which was highest among all units understudy. While the raw material cost of TISCO was17.3 percent, which is lowest among all unitsunder study. The average raw material cost of

RINL and SAIL were 43.5 and 42.8 respectively.The standard deviation of JVSL indicates highfluctuation in cost.


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Wages and salaries cost as percentage ofsales has been presented in AnalysisTable-3.

The portion of this cost in total cost islow. It ranged between 1 to 20 percent.The average wages and salaries cost ofstudy was 8.5 percent; while the JVSL

cost is lowest (1.1 percent) among allunits under study. The average wagesand salaries cost of SAIL was 19.2percent which is highest among all units

under study. The average wages andsalaries cost of RINL was 8.6 percent

which is close to average of study.


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Excise Duty cost as percentage of saleshas been presented in Analysis Table-4.

The portion of this cost in total cost issignificant. The average excise duty costof study was 10.9 percent; while theISPAT cost is lowest (9.6 percent) among

all units under study. The average exciseduty cost of SAIL was 12.1 percent whichis highest among all units under study.The average wages and salaries cost of

RINL was 11.7 percent and TISCO was10.7 which is near to average of study.


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The range of power and fuel cost inselected units was between 4 to 13.6percent. The average power and fuel cost

of the study was 8.8 percent; while theaverage power and fuel cost of RINL (4.0percent) was much lower than theaverage of study.

The average power and fuel cost of ISPAT(13.6 percent) was highest among all theunits under study.

The Standard deviation of JVSL(4.5)indicates high fluctuation in cost, whilestandard deviation of RINL(1.0) indicateslow fluctuation in cost.


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Depreciation cost as percentage of salespresented in Analysis Table-6. Theaverage depreciation cost of RINL, SAIL,TISCO, ISPAT and JVSL were 10.7percent, 5.7 percent, 5.6 percent, 7.8

percent and 7.9 percent respectively;where as the average of all units understudy was 7.6 percent. The table data andstandard deviation indicates a low

fluctuation in the cost in all units understudy.


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The average ratio of RINL, SAIL and JVSLwere 10.9 percent, 10.5 percent and 8.5percent which were lower than the

average ratio(14.9 percent) of industry.While TISCO ratio was 27.4 percenthighest among all units under study.


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Analysis Table-8 reveals the ratio financial

charges to total sales in steel industry ofIndia. The ratio showed a fluctuatingtrend. The average ratio of study was 8.1percent whereas the ratio of ISPAT andJVSL were higher than average ratio ofstudy where as ratio of RINL, TISCOwere lower than average ratio of study.

The standard deviation of JVSL indicateshigh fluctuations.

CONCLUSION


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CONCLUSION

The close view of the analysis showed thatthere is increasing sales trend. The sales trendof JVSL indicates highest trend among all units

under study.The above analysis indicates that the most

influencing factor in cost structure of Steelindustry is Raw Material and stores consumed

cost. The portion of Raw material and Storescost in total cost 39.4 percent, whereas theportion of Excise duty and Admn. Selling & othercost in total cost structure were 10.9 percentand 14.9 percent. So, it can be concluded that toimprove the profitability of units there is a needto give proper attention towards Raw materialcost by corporates. The average raw materialcost of TISCO(17.3 percent) is much below the

average of industry which needs to be analyzed.

Steel Industry Cost Structure_Project Presentation

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