core values
It has the largest integrated graphite electrodes plant in the world.

Dear Shareholders,

Fiscal 2013-14 was one of the most challenging years for the international graphite electrode industry due to a number of concurrent factors: slow economic growth, political inertia in India, weak global steel industry (excluding China), decline in graphite electrode realisations and rising inventory. Not surprisingly, some of the largest global electrode manufacturers reported losses.

As conveyed to you in my previous address, the global situation continued to demonstrate volatility as the eurozone crisis subsided only marginally during the year under review. The continued pressures faced by the electric arc furnace steel sector exerted a downward pressure on prices through the year.

My assessment this time is that we have hit the trough and hereon we should see a recovery, albeit a slow and steady one. We were back to the wall, fighting all these factors and the entire team at HEG showed exceptional resilience and a resolve to do better. Adversity invariably brings out the best in the brave.

At HEG, we utilised these circumstances to strengthen our various operational areas, customer relationships and cost reduction initiatives to achieve reasonable success in difficult times. We were abundantly helped in our endeavours by our raw material suppliers through reduced costs and timely deliveries to bring down inventories. Having sustained these trying times and come out reasonably unscathed, we are confident of capitalising on our strengths whenever the tide turns in our favour.

The way forward

The big message that I would like to leave with our shareholders is that if this is how we performed in the most challenging of markets, then we are optimistic of prospects as soon as our sector rebounds, for the following reasons:

  • Two global electrode majors announced capacity closure, virtually removing 90,000 TPA of capacity from the marketplace. Going ahead, we are optimistic that this evacuation will correct the industry oversupply, improve realisations and encourage competitive players to aspire for higher growth.
  • The share of EAF in steel making is expected to increase especially in the US (due to shale gas find), and the Middle East due to the large DRI volumes available, scrap reservoirs and low energy costs.
  • Input costs are expected to moderate; needle coke prices are expected to decline in 2014-15 as new capacities are progressively commissioned.
  • The Company holds a superior order book (31st March, 2014) than the previous year, which is expected to enhance capacity utilisation in 2014-15.

Message to shareholders

Even as the industry reality remains challenging, HEG is optimistic of its prospects. Going ahead, the Company will focus on profitable growth. We are optimistic that this will translate into superior margins, returns on employed capital and market capitalisation, enhancing value in the hands of all those who own shares in our company.

With best regards,

Ravi Jhunjhunwala
Chairman & Managing Director