Pak Steel posts Rs four billion loss in first quarter

[Naveed Yaseen]

RIZWAN BHATTI
KARACHI (October 07 2009): Pakistan Steel Mills Corporation (PSMC) has posted some Rs 4 billion losses during first quarter of the current fiscal year mainly due to slow production, following shortage of raw material, sources told Business Recorder on Tuesday.

According to provisional accounts, accumulated losses of the country's largest steel producer have mounted to about Rs 26 billion during the last 15 months, as PSMC had already faced Rs 22 billion losses in last fiscal year relative to some Rs 2.37 billion profit in fiscal year 2007-08, sources said.

They said that massive losses have occurred due to ineffective policies, non-technical management, shortage of raw material, and global economic recession, and these reasons have rebound profit of PSMC in losses. Pakistan Steel's raw material iron ore, both 'Lump' and 'Fine'categories, has almost finished, due to which production of PSMC has declined to 20-30 percent during the last one week, while average production capacity of mill was 50-55 percent in September 2009.

Sales of PSMC stood at Rs 6.4 billion during the first quarter of current fiscal year 2009-10 as against the target of Rs 9 billion and annual budgeted target of Rs 36 billion. Sources said that FIA action against PSMC steel dealers created panic in the steel market. Due to that dealers are reluctant to procure huge quantity of Pakistan Steel products. Slow production is also another reason of decline in sales.

They said that due to the slow production and declining sales Pakistan Steel is facing severe financial crunch and recently has requested the federal government for financial assistance. "At present, PSMC requires some Rs 5-8 billion funding for smooth operation, besides on-time and massive availability of raw material," they added.

They said a ship carrying 20,000 tons of fine ore reached Port Qasim on Monday and some 5,000 tons ore has been unloaded from the ship to increase production. Sources said that major losses were registered during the tenure of recently sacked chairman Mueen Aftab Sheik. However, the mill is facing losses due to poor marketing strategy and inefficient policies of management.

"Despite the production and operational losses, the management of PSMC is not adopting efficient policies to minimise the losses of mill and make it stronger" they said, and added that at this time the mill is required to be run at maximum production capacity to increase sales. It may be mentioned here that with a production capacity of some 1.1 million tons, PSMC has some 20 percent share in domestic market.

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