 "Volume growth saves the day as Tata Steel profit beats estimates")
Tata Steel reported a consolidated profit of Rs 916.7 crore in the September quarter, as against the loss of Rs 364 crore in the corresponding quarter last year.
Importantly, the profit was much ahead of analyst estimates at about Rs 339 crore. The year-on-year turnaround was largely due to volume growth. At the group level, the company reported volume growth of 6.75 per cent to 6.48 million tonnes in the September quarter.
However, a large part of this volume gain has come from Indian operations on the back of capacity expansions earlier. Thanks to this, it was able to sell 3.86-million-tonne steel during the quarter up by almost 18 per cent, compared to the year-ago quarter.
The volume growth thus reflects on the group’s sales turnover, which rose during the quarter by 7.4 per cent to Rs 36,644.9 crore. Had there been an improvement in the overall realisations as well, the turnover would have been even better. Lower steel prices in the domestic business led to some pressure on realisations, which during the quarter fell to Rs 44,697.7 a tonne against Rs 48,459.4 a tonne. While overall realisations were down in the domestic segment, some segments saw an improvement. Realisations in the flat products was higher due to increased sale of value-added products.
Further, because of ramp up in capacity in India and cost savings in the Indian operations, operating performance of the consolidated entity improved. The group reported a strong 54.3 per cent spurt in operating profits (Ebitda) to Rs 3,784 crore. Importantly, this time the large contribution has come from Europe, which made Ebitda per tonne of Rs 1,435 against loss a tonne of Rs 119.7 in the corresponding quarter last year. What helped the performance in the European business was cost savings and differentiated product mix helping operating profit growth despite soft steel prices and weak demand.
While commenting on the performance of the European operations, Karl Ulrich Kohler, managing director & chief executive, Tata Steel Europe, said “The improvement in production continued into the second quarter as our operations stabilised following the restart of the Port Talbot blast furnace.” The outlook is better, as there are clear signs of modest improvement in Europe, he added.
Importantly, the profit was much ahead of analyst estimates at about Rs 339 crore. The year-on-year turnaround was largely due to volume growth. At the group level, the company reported volume growth of 6.75 per cent to 6.48 million tonnes in the September quarter.
However, a large part of this volume gain has come from Indian operations on the back of capacity expansions earlier. Thanks to this, it was able to sell 3.86-million-tonne steel during the quarter up by almost 18 per cent, compared to the year-ago quarter.
The volume growth thus reflects on the group’s sales turnover, which rose during the quarter by 7.4 per cent to Rs 36,644.9 crore. Had there been an improvement in the overall realisations as well, the turnover would have been even better. Lower steel prices in the domestic business led to some pressure on realisations, which during the quarter fell to Rs 44,697.7 a tonne against Rs 48,459.4 a tonne. While overall realisations were down in the domestic segment, some segments saw an improvement. Realisations in the flat products was higher due to increased sale of value-added products.
Further, because of ramp up in capacity in India and cost savings in the Indian operations, operating performance of the consolidated entity improved. The group reported a strong 54.3 per cent spurt in operating profits (Ebitda) to Rs 3,784 crore. Importantly, this time the large contribution has come from Europe, which made Ebitda per tonne of Rs 1,435 against loss a tonne of Rs 119.7 in the corresponding quarter last year. What helped the performance in the European business was cost savings and differentiated product mix helping operating profit growth despite soft steel prices and weak demand.
While commenting on the performance of the European operations, Karl Ulrich Kohler, managing director & chief executive, Tata Steel Europe, said “The improvement in production continued into the second quarter as our operations stabilised following the restart of the Port Talbot blast furnace.” The outlook is better, as there are clear signs of modest improvement in Europe, he added.
The Street was keeping an eye out for any indication of an increase in debt but the company has been able to keep the same under check. Koushik Chatterjee, group executive director (finance and corporate) said that there is no significant debt repayment for the next 12 months as the company has been repaying its debts as they fall due. Apart from this, the company is also holding itself back and refraining from taking any news debt, he added. The major debt payment are scheduled for end 2015, 2016 and 2017. "We do not need to restructure our debt at present," he said. The Group has paid Rs 7,000 crore debt in July-September quarter and about Rs 14,000 crore during April to September.
On the Kalinganagar project in Orissa, the management indicated that it was not impacted by the Phailin cyclone and work at the site is now picking up. The company has spent a total sum of Rs 12,600 crore until September of which Rs 5,000 crore was in April to September of FY14.