News Analysis

Improved volumes and better realisation drive performance of Tata Steel

Satya Sontanam | Updated on February 12, 2018 Published on February 12, 2018

Tata Steel reported a four-fold increase in profits in the latest December quarter on the back of improved volumes in the domestic market and better realisations across markets. The company has recorded a consolidated profit of Rs 1,136 crore for the quarter ending December 2017, against Rs 232 crore for the same period a year ago.

Consolidated revenues for the quarter were at Rs 33,447 crore, which was higher by 15 per cent y-o-y and 3 per cent q-o-q. The company has recorded its highest ever quarterly sales of 3.3 million tonnes (mt) in the December quarter, which is a 10 per cent growth y-o-y. Indian operations contributed to about 50 per cent of overall volumes, a growth of 7 per cent q-o-q and 10 per cent y-o-y.

Volumes in the Indian steel market are currently driven by healthy demand from the auto and capital goods sector. While demand from construction is muted, it is expected to improve in the January to June period, usually regarded as a good period for construction.

The European performance was, however, weak owing to higher costs and reduced volumes attributed to the shutdown of the plant for maintenance activities. However, performance is expected to improve in the coming quarters.

The consolidated operating profit for the December quarter stood at Rs 5,801 crore, which is a rise of about 59 per cent y-o-y. Nearly 80 per cent of the operating profit was contributed by Indian operations due to the cyclical upturn in the commodities market that led to better realisations. Operating profit per tonne for the Indian operations has increased from nearly Rs 11,000 per tonne in the September quarter to Rs 14,000 per tonne in the December quarter. Also, the reduction of coking coal consumption cost has aided profitability. The company’s continued efforts to reduce the consumption of coking coal, will help bring down raw material cost further.

The overall EBITDA margins have improved from 12.4 per cent in the September quarter to 17 per cent in the December quarter.

Tata Steel has also achieved its best ever quarterly sales in the higher margin segments such as automotive and branded products, among others.

Good times ahead

Going forward, the outlook for the steel industry as a whole looks positive. The World Steel Association has estimated the growth of steel demand at 5.3 per cent in 2018. Steel prices are also expected to be healthy with revival in the domestic market. Tata Steel is well placed to reap the benefits.

In respect of the joint venture with Thyssenkrupp to restructure the European steel business, for which the memorandum of understanding was signed in September 2017, the company continues to expect cost synergies to the effect of €400 million to €600 million from the joint venture perspective. This is also expected to deconsolidate the debt by about €2.5 billion from the group’s balance sheet, which will be transferred to the joint venture. However, the details of the synergies and the timeline will be available only once the definitive agreement is made with Thyssenkrupp.

The board has also approved the 5 million tonnes per annum (mtpa) capacity expansion at Kalinganagar port that includes investment in upstream facilities, 2.2 mtpa cold rolling mill, and raw material facilities. The total project cost is estimated at Rs 23,500 crore. The company has spent a capex of about Rs 5,320 crore out of the planned expenditure of Rs 7,000 crore for FY18.

Published on February 12, 2018

A letter from the Editor


Dear Readers,

The coronavirus crisis has changed the world completely in the last few months. All of us have been locked into our homes, economic activity has come to a near standstill. Everyone has been impacted.

Including your favourite business and financial newspaper. Our printing and distribution chains have been severely disrupted across the country, leaving readers without access to newspapers. Newspaper delivery agents have also been unable to service their customers because of multiple restrictions.

In these difficult times, we, at BusinessLine have been working continuously every day so that you are informed about all the developments – whether on the pandemic, on policy responses, or the impact on the world of business and finance. Our team has been working round the clock to keep track of developments so that you – the reader – gets accurate information and actionable insights so that you can protect your jobs, businesses, finances and investments.

We are trying our best to ensure the newspaper reaches your hands every day. We have also ensured that even if your paper is not delivered, you can access BusinessLine in the e-paper format – just as it appears in print. Our website and apps too, are updated every minute, so that you can access the information you want anywhere, anytime.

But all this comes at a heavy cost. As you are aware, the lockdowns have wiped out almost all our entire revenue stream. Sustaining our quality journalism has become extremely challenging. That we have managed so far is thanks to your support. I thank all our subscribers – print and digital – for your support.

I appeal to all or readers to help us navigate these challenging times and help sustain one of the truly independent and credible voices in the world of Indian journalism. Doing so is easy. You can help us enormously simply by subscribing to our digital or e-paper editions. We offer several affordable subscription plans for our website, which includes Portfolio, our investment advisory section that offers rich investment advice from our highly qualified, in-house Research Bureau, the only such team in the Indian newspaper industry.

A little help from you can make a huge difference to the cause of quality journalism!

Support Quality Journalism
This article is closed for comments.
Please Email the Editor
You have read 1 out of 3 free articles for this week. For full access, please subscribe and get unlimited access to all sections.