By Emma Ujah, Abuja Bureau Chief

When Dana Steel bought the Kastina Steel Rolling Mills in 2006, under the Federal Government’s privatisation programme, it was moribund, having been closed due basically to lack of good corporate governance.  The bad state of health of the company was evident from the refusal of private investors to bid for it in 2001 when the Bureau of Public Enterprises, BPE, put it on offer.

It was only in 2006 that Dana expressed interest in the company.  Thus, for Kastina Steel, it was a sole bidder after about five years of being taken to the market, unlike Oshogbo and Jos mills that got buyers, almost immediately.

However, the General Manager of Dana Steel which now owns and runs Kastina Steel, Mr. Madhav Mekala, said the private investors have turned the fortune of Kastina Steel around in a matter of three years, after the takeover.

He told a team of journalists on a post-privatisation inspection, last week, that within three years of operation, the company had achieved break-even record.

According to him: “In 2001 when the Federal Government through its privatisation agency, the Bureau of Public Enterprises, BPE, called for bid on the steel rolling mills, Kastina Rolling Mill was the last to receive bid because investors did not show interest in it.

“The other two –  Oshogbo and Jos rolling mills were sold to various corporate investors early in the process but this particular company, Kastina Mills, nobody was interested in buying until 2006 when Dana came forward to bid and of course, it was a sole bidder.

“The total financial transaction between BPE and the Katsina Rolling Company (KRC) was completed in August 2006. Immediately we took over the company, we set out to verify what was necessary to get it back into production and within the period of three months, the company was put in order

“When we acquired it, the plant was more or less gone. It was a moribund plant. But we had to work really hard because nobody can just put in huge amount of capital like that and forget the investment.

Our board and management executed the turn-around plan in such a manner that we got the company off its feet within three months.  We took over in August 2006 and by December 2006, it was back in business”

.Work force

Asked what happened to the workers that were inherited by Dana, the General Manager said, “the first thing we did was to retain maximum of old KRC employees back into the workforce, and we believed that they had the professional knowledge and the skills which they had already acquired from the 15 to 20 years of working in KRC.

Those workers were the ones that supported us to put the mill in order and I can say that it was like magic. I said it was magic because I can see where that of Jos is today even though it was privatized between 2001 to 2002, the staff here are very capable, and with their help and with our investments, we were able to put back the mill in order by December 2006.

“Then another thing we considered we needed to do to achieve the installed capacity was to pay particular attention to the production levels. We divided the total plant into three phases – year 2007, 2008 and up to 2010. So each of these years, we were investing, re-modeling the plant to the latest technology without stopping production.

We planned it in such a way with our staff that we had to run the plant while repairs were being taken care of. As we acquired the plant, the technology the mill was using was that of 1982, but between 2006 to 2010, we have upgraded all the electronics, electrical and the controls of the mill to the latest version of 2010. For this, we have the support of many manufacturing industries in India, Japan, and finally, the mill is back in order.

How the global meltdown affected its operations in 2008

“In 2008, we had some crisis, the financial crisis; the cost of importing billets became too high. That was how the backward integration plan of constructing Steel Melt Shop (SMS) came to our minds.

We implemented it in time and within 18 months, we had commissioned the plant and started making our own billets from the raw materials which is nothing but scraps.

“With these scraps, we are melting and producing our billets, and we are rolling and pushing the products into the market at very reasonable prices and high quality.

But the story never ended there, the steel melt shop has 20% capacity production that gives us 40,000 metric tonnes per annum, which is not sufficient.

“But this year, the SMS phase two will be starting to increase the capacity by another 45,000 metric tonnes which gives 90,000 metric tonnes per annum, which is 75 per cent of the rolling mill capacity.

In 2012 when the plants are in place, once we commission the SMS phase two, then we don’t need to look back. Units 1,2 and 3 of the SMS will be able to produce sufficient billets for the rolling mill to move ahead.

Staff strength

On the workforce, two mills put together, the permanent staff is 207, and additional 63 contract staff.

Investment

The GM also said that his company has made huge investments in the company to bring it to the current position and planned to expand its operations further with more investments.

His words: “We have invested N90 million approximately to refurbish the rolling mill at the initial stage. Phase 1, 2 and 3, the refurbishment of the mill had equally cost N90 million in the three phases, totalling approximately N270.

While the production was on-going, the investments were taking place, 25% in the first year, 25% in year two and balance 50% in the final year, 2009. These investments have put the mill back into proper operation.

“According to the post- acquisition plans, we have implemented the steel melt shop (SMS) that is backward integration project, this particular project cost almost approximately N1.8 billion. And in our plans to improve the capacities, we may need to put another N1.8 billion more in SMS phase two.”

Electricity supply and other challenges facing the company.

“We are running the mill 12 hours a day because we don’t have sufficient supply in this Katsina area, so the installed capacity will drop to 144,000 metric tonnes per annum, which is 60% installed capacity. The total capacity is 207,000 metric tonnes

“Our capital investment is very high because most of our materials come from Lagos, so we need to stock a lot.

“Long distance transportation and getting qualified people to run the steel company are our major challenges. Qualified Nigerians are a bit scarce in the northern part of the country where the company is located.

The northerners are not into steel when compared to Lagos or other parts of the country.