The steel producer had earned enough profits during year 2000-01 to 2007-08, but during the current year it has incurred losses due to low sales and import of raw material at high rates. The Mills is facing huge financial crisis due to consecutive losses in the current fiscal year, sources said.
Financial documents made available to Business Recorder show that PSMC faced a loss of Rs 13.248 billion during July-March period of 2008-09 against 2007-08 profit of Rs 3.44 billion. Sources said that inefficient policies, purchase of raw material on high rates and low demand of steel products in the domestic market due to global economic meltdown were the major causes of the rising losses of the mills.
They said that PSMC made a purchase agreement of raw material in April 2008, when the prices were at peak level. But after that the price of raw material like iron ore declined sharply in the world market. Despite reduction in the raw material prices, PSMC was not able to cancel or revise the already made contracts due to the likely legal action by the supplier of the raw material.
Sources in PSMC confirmed that the mills losses had been gradually increasing and crossed level of Rs 13 billion just in nine months of current fiscal year.
In July, 2008), PS posted a profit of Rs 367 million. However, in the remaining eight months, the mills posted huge losses. PS registered a loss of Rs 55 million in August 2008, Rs 200 million in September 2008, Rs 660 million in October 2008 and Rs 4.1 billion in November 2008. December 2008 losses amounted to Rs 2.5 billion, Rs 2 billion in January 2009, Rs 2 billion in February 2009 and Rs 2.1 billion in March 2009. Against this, during fiscal year 2000-01 the mills posted Rs 552 million profit, Rs 102 million in 2001-02, Rs 1.042 billion in 2002-03, Rs 4.852 billion in 2003-04, Rs 6.008 billion 2004-05, Rs 705 million 2005-06, and Rs 3.159 billion in 2006-07.
Sources said that sales were also on decline since July 2008, which stood at Rs 5.1 billion in July last to Rs 2.9 billion in March 2009, due to reduction in the Public Sector Development Program (PSDP) by the federal government and slow economic activities.
They said that PSMC management adopted an ineffective marketing policy, which raised the losses of the mills. With the aim to reduce inventory and enhance sales, the PS management sold its products at under-cost, which also increased the losses, they added.
They said that the prices of all products increased in the year 2008-09 comparing with the prices of 2007-08 except the billets which is being sold Rs 6,500 per ton less than the price of 2007-08.
The re-rolling mills association also offered to pay Rs 5,000 per ton higher price in the presence of secretary ministry of industries. However, the mills did not change the prices of billet.
They said that MS billet is the one of the products, which was being sold some Rs 30,000 per ton less than cost to earn revenue for meeting daily expanses. Meanwhile, several attempts were made for obtaining the version of PSMC management and after telephonic conversation PS spokesman assured that he would send their point of view in evening on fax. However, till the filing of story Business Recorder received no fax.