 "Steel makers' Ebitda margins rise; demand woes continue")
The operating margins of JSW Steel and Tata Steel improved in the quarter ended March. However, the two steelmakers remain cautious on the demand scenario for this financial year.
Tata Steel said its earnings before interest, tax, depreciation and amortisation (Ebitda) improved by 2.5 basis points — from 10.1 per cent in the fourth quarter of FY12 to 12.6 per cent in the corresponding quarter of FY13. In the same period, JSW Steel’s Ebitda rose by 100 basis points to 18.3 per cent in the same period.
Steel Authority of India Limited is yet to announce its results for the quarter ended march.
The iron ore mining ban in Karnataka had hit JSW Steel the hardest. The company had to source iron ore from outside the state and through e-auctions, which led to a rise in its iron ore costs. “Despite paying higher prices in the e-auction for iron ore, that too, for inferior quality, the company could report an improved financial performance, primarily due to sourcing efficiency in coal, optimised blend for coal for coke-making and increased waste heat utilisation in various process units across plants,” it said.
Tata Steel, too, remains cautious on steel demand, particularly in Europe. The World Steel Association estimates steel demand in Europe would fall 0.5 per cent this year. Next year, demand would grow 3.3 per cent to 144.1 million tonnes, the association estimates.
In the last three years, Tata Steel Europe has invested £1 billion in towards making itself more competitive, including £220 million in rebuilding a blast furnace at its Port Talbot facility. This helped the company report Ebitda of Rs 613 crore in the quarter ended March, against a loss of Rs 428 crore in the previous quarter. In the fourth quarter of FY12, Tata Steel Europe had posted Ebitda of Rs 146 crore.
In a report dated May 24, Raashi Chopra and Sidak Bir Singh Khurana of Citi Research said, “Lower costs, coking coal, coke purchases (147 kilotonnes, against 179 kilotonnes in the third quarter), power, forex losses and royalty helped improve Ebitda quarter-on-quarter (q-o-q), despite lower blended realisations. While steel prices were almost flat q-o-q, a leaner mix impacted overall realisations.”
The Euro zone crisis continued to weigh on steel demand in that region — demand was 70 per cent of 2007 levels; the short- to medium-term outlook for the company was severely depressed, Tata Steel said.
However, the company’s operations in India continue to support it. Tata Steel India saw its net profit rise to Rs 1,309.21 crore in the quarter ended March, as against Rs 1,046.39 crore in the quarter ended December. Last year, Tata Steel India commissioned a three-million-tonne (mt) blast furnace at Jamshedpur, which helped the company raise steel production by one mt to 7.94 mt last financial year. With the blast furnace achieving full capacity in March, production would only increase this financial year.
In FY13, JSW Steel produced 8.5 mt of steel. The company said it planned to increase production 10 per cent this financial year.
In FY13, steel demand in India grew 3.3 per cent.
JSW Steel said, “With GDP (gross domestic product) expected to grow six per cent this financial year, steel demand would track the GDP, in line with the revival of the investment cycle.”
The World Steel Association estimates steel demand to grow 2.9 per cent this year. “Since China is slowing, commodity prices are expected to be depressed, which is good for India,” JSW said.
Tata Steel said its earnings before interest, tax, depreciation and amortisation (Ebitda) improved by 2.5 basis points — from 10.1 per cent in the fourth quarter of FY12 to 12.6 per cent in the corresponding quarter of FY13. In the same period, JSW Steel’s Ebitda rose by 100 basis points to 18.3 per cent in the same period.
Steel Authority of India Limited is yet to announce its results for the quarter ended march.
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JSW Steel said operating margins had improved, despite a fall in steel prices. “It is mainly on account of innovative coal blend and sourcing efficiency,” it said.
The iron ore mining ban in Karnataka had hit JSW Steel the hardest. The company had to source iron ore from outside the state and through e-auctions, which led to a rise in its iron ore costs. “Despite paying higher prices in the e-auction for iron ore, that too, for inferior quality, the company could report an improved financial performance, primarily due to sourcing efficiency in coal, optimised blend for coal for coke-making and increased waste heat utilisation in various process units across plants,” it said.
Tata Steel, too, remains cautious on steel demand, particularly in Europe. The World Steel Association estimates steel demand in Europe would fall 0.5 per cent this year. Next year, demand would grow 3.3 per cent to 144.1 million tonnes, the association estimates.
In the last three years, Tata Steel Europe has invested £1 billion in towards making itself more competitive, including £220 million in rebuilding a blast furnace at its Port Talbot facility. This helped the company report Ebitda of Rs 613 crore in the quarter ended March, against a loss of Rs 428 crore in the previous quarter. In the fourth quarter of FY12, Tata Steel Europe had posted Ebitda of Rs 146 crore.
In a report dated May 24, Raashi Chopra and Sidak Bir Singh Khurana of Citi Research said, “Lower costs, coking coal, coke purchases (147 kilotonnes, against 179 kilotonnes in the third quarter), power, forex losses and royalty helped improve Ebitda quarter-on-quarter (q-o-q), despite lower blended realisations. While steel prices were almost flat q-o-q, a leaner mix impacted overall realisations.”
The Euro zone crisis continued to weigh on steel demand in that region — demand was 70 per cent of 2007 levels; the short- to medium-term outlook for the company was severely depressed, Tata Steel said.
However, the company’s operations in India continue to support it. Tata Steel India saw its net profit rise to Rs 1,309.21 crore in the quarter ended March, as against Rs 1,046.39 crore in the quarter ended December. Last year, Tata Steel India commissioned a three-million-tonne (mt) blast furnace at Jamshedpur, which helped the company raise steel production by one mt to 7.94 mt last financial year. With the blast furnace achieving full capacity in March, production would only increase this financial year.
In FY13, JSW Steel produced 8.5 mt of steel. The company said it planned to increase production 10 per cent this financial year.
In FY13, steel demand in India grew 3.3 per cent.
JSW Steel said, “With GDP (gross domestic product) expected to grow six per cent this financial year, steel demand would track the GDP, in line with the revival of the investment cycle.”
The World Steel Association estimates steel demand to grow 2.9 per cent this year. “Since China is slowing, commodity prices are expected to be depressed, which is good for India,” JSW said.