Domestic, European operations propel Tata Steel in Q4

Tata Steel, India’s largest steel producer, on Wednesday announced a net profit of Rs 1,040 crore for the quarter ended March, against the Street’s estimate of Rs 920 crore. In the corresponding period last year, the company had posted a loss of Rs 6,530 crore.

The company managed to beat market estimates due to higher volumes, amid an improvement in domestic business and a revival in demand in Europe. The company’s revenue for the quarter rose 22 per cent year-on-year to Rs 42,428 crore, higher than the Bloomberg consensus estimate of Rs 40,700 crore. The company attributed the volume growth to an improved product mix, aggressive marketing strategies and more focus on the automobile segment, primarily in the Indian market. During the quarter, steel deliveries rose 16 per cent year-on-year to 7.62 million tonnes. Compared to the December 2013 quarter, the growth was 19 per cent.

“Focus on the automobile segment and sales of value-added products helped us improve revenue in India,” said T V Narendran, managing director (India and Southeast Asia). The company gained market share, selling 5.6 per cent more alloy in the last quarter, while nationwide demand grew about a per cent. The company was able to maintain prices in the domestic market, where sectors such as automobiles and construction saw a slump.

Owing to the weak macroeconomic environment in India, the company restructured its marketing and sales strategy to increase customer base, Narendran said.

Koushik Chatterjee, group executive director (finance and corporate), said the company had spent Rs 1,800 crore on the Kalinganagar project during the March quarter, adding till March 31, about Rs 16,350 crore had been spent on the project. “Kalinganagar is on track and is likely to start operations in the final quarter of FY15,” he said.

“In Southeast Asian operations, investment in assets, efficiency improvement and customer focus helped boost performance, despite political instability and pressure from cheaper imports,” said Narendran.

European operations, accounting for about 60 percent to the overall revenue sales, focused on cost reduction to improve operations, said Karl Kohler, managing director and chief executive, Tata Steel Europe. “Going ahead, our (Europe operations) focus will continue to remain on bringing down costs, as we cannot rely on the market though it has shown demand growth in the last few months. Europe has over-capacity and so, the pricing power is not with producers,” he said.

Focus on selling high-value products aided the stellar show in Europe.

As of March 31, the Tata Steel group’s gross debt stood at Rs 81,000 crore, while net debt was Rs 70,000 crore. On refinancing debt, Chatterjee said, “It will happen when it has to happen. We will take a call when it is due.”

As of March 31, Tata Steel’s net debt was Rs 67,330 crore, while cash and equivalents stood at Rs 11,370 crore.

On a consolidated basis, earnings before interest, tax, depreciation and amortisation a ton rose 18 per cent to Rs 6,166.