Man in charge says Pakistan Steel to become profit-making entity

The financial policies being followed at present will turn Pakistan Steel Mills into a profit-making entity.

KARACHI: The financial policies being followed at present will turn Pakistan Steel Mills (PSM) into a profit-making entity by the end of this year. This was asserted by the acting chief executive officer (CEO) of PSM, Imtiaz Lodhi, while talking to The Express Tribune.

The ambitious CEO seeks to boost sales to Rs57 billion this year, more than a 100 per cent increase from the Rs27 billion sales seen in 2009-10. When questioned about how such a rise would be possible, Lodhi explained that PSM was utilising only 40 per cent of its production capacity. He claimed that this figure could be increased to 80 per cent.

However, Lodhi warned that if the financial health of the mammoth organisation is to be improved, the continuation of current policies is necessary.

His team has also chalked out a plan to generate income through non-core business activities. These include giving out PSM-owned land on lease, sharing port facilities with Tuwairqi Steel Mills and selling coke to multinational companies and international buyers.

The acting CEO pointed out that repair work on the second coke oven battery is expected to be completed by December this year, after which PSM will be able to operate at 80 per cent production capacity. Lodhi said that after the renovation, Rs15 billion worth of coke would be available for export.

Talking about the Rs25 billion bailout package being offered to PSM by the government, Lodhi rebuffed media reports which claimed that PSM is receiving subsidies from the government. “PSM is taking loans from the government and not subsidies. These loans will be paid back in due time with interest,” he asserted.

The organisation is scheduled to receive an instalment of Rs6.64 billion in September as part of the bailout package. However, this will be in the form of a subordinate loan. “Nobody has ever mentioned the positive role played by Pakistan Steel in the country’s economy,” he commented.

The current administration is working towards organisational restructuring rather than privatisation. Lodhi clarified that once the organisation is converted into a profit making entity, the next target of the administration would be to work towards an Initial Public Offering (IPO).

He disclosed that PSM is in the process of assessing its total assets and this exercise is expected to be completed within three months. He said that according to initial estimates, the total is in the region of Rs100 billion.

PSM changed its business cycle after the financial setbacks of last two years. The old cycle was based on the more rigid Japanese Index, which has been replaced with the Chinese Index, owing to its shortcomings in case of sharp ups and downs in international steel prices.

“The business model has been changed after chaos hit in 2008-09 when international steel prices sharply declined,” he added.

He voiced hope that Pakistan and Russia would sign a contract for expansion of PSM during President Zardari’s visit to Russia scheduled for September. In the short run, PSM has plans to increase its total production capacity to 3 million tons from the present 1.1 million tons.

Published in The Express Tribune, August 3^rd, 2010.