Tata Steel Limited
NSE Symbol TATASTEEL
CONSOLIDATED RESULTS FOR Q2 FY 2011
Tata Steel Limited today declared Consolidated Financial Results for the first half and second quarter ending September 30, 2010.
Group Performance Highlights:
Tata Steel Group during H1 OF FY 2010-11 recorded Profit after tax (after minority interest and share of profit of associates) of Rs.3,804 crores compared to a Loss of Rs.4,916 crores in H1 FY’10, an improvement of Rs.8,720 crores. The Group’s Profit after tax for Q2 FY’11 at Rs.1,979 crores was around 8.5% higher than the profit of Rs.1,825 crores in Q1 FY’11.
Group EBITDA in H1 FY’11 was Rs.9,024 crores compared to Rs.606 crores in H1 FY’10. Group EBITDA in Q2 FY’11 at Rs.4,497 crores matched the level recorded in Q1 FY’11, despite steel prices falling in India and higher raw materials prices affecting the financial performance of both the Indian and European operations.
Group consolidated turnover at Rs.28,646 crores in Q2 FY’11 rose by Rs.1,453 crores, or 5%, compared with Q1 FY’11 on increased deliveries in India and price improvements in other geographies.
The Group’s steel deliveries fell 1% to 5.82 million tonnes in Q2 FY’11 from Q1 FY’11. Lower deliveries at the European operations during the summer months were largely made up by higher deliveries from Tata Steel India and Tata Steel Thailand.
Net Finance Charges for the Group at Rs.664 crores during the September quarter increased by US$15 million over Q1 FY’11 on account of lower interest income earned.
Liquidity and Net Debt: The Group continued to enjoy a strong liquidity position of Rs.7,841 crores (US$1.74 billion) at the end of September 2010, resulting from tight working capital management across all geographies. The Group’s net debt at the end of September 2010 stood at Rs.48,096 crores (US$10.7 billion).
1. Financial Performance Analysis:
Consolidated Financial results summary (under Indian GAAP) for the six months ended September 2010
| All figures in US$ million, unless specified H1 FY11 | H1 FY10 | HIGHLIGHTS | Q2 FY11 | Q2 FY10 | Q1 FY11 |
| 11.72 | 11.28 | Steel Deliveries (million tons) | 5.82 | 6.05 | 5.90 |
| 12,427 | 10,835 | Turnover | 6,375 | 5,652 | 6,052 |
| 2,008 | 135 | EBITDA | 1,001 | 90 | 1,007 |
| 16.2 | 1.2 | EBITDA Margin (%) | 15.7 | 1.6 | 16.6 |
| 472 | 499 | Depreciation | 240 | 257 | 232 |
| 281 | 356 | Net Finance Charges | 148 | 160 | 133 |
| 1,225 | (981) | PBT | 604 | (532) | 621 |
| 9.9 | (9.1) | PBT Margin (%) | 9.5 | (9.4) | 10.3 |
| 847 | (1,094) | Profit after Taxes, Minority Interest and Share of Associates | 440 | (602) | 406 |
| 6.8 | (10.1) | PAT Margin (%) | 6.9 | (10.7) | 6.7 |
Tata Steel MD, Mr HM Nerurkar, said: “….While we are confident of a fairly strong performance this financial year, we are focusing on the introduction of higher value-added products to our existing product range in order to ensure we retain market leadership in future. Meanwhile, the 3 million tonne brownfield expansion at Jamshedpur is progressing as planned.”
Tata Steel Europe MD & CEO, Dr Karl-Ulrich Köhler, said: “….In September our lenders showed their confidence in the Group’s future prospects by agreeing to a refinancing package to stabilise our debt arrangements….”
Tata Steel Group
Group sales of Rs.55,840 crores in the first half were 15% up from the Rs.48,687 crores in H1 FY’10. Q2 sales of Rs.28,646 crores were 13% up from the Rs.25,395 crores of Q2 FY’10 and 5% up from the Rs.27,194 crores of Q1 FY’11.
The Group posted an EBITDA of Rs.9,024 crores in the first half, almost 15 times higher than the Rs.606 crores in H1 FY’10. Q2 EBITDA of Rs.4,497 crores was almost 11 times higher than the Rs.402 crores of Q2 FY’10 and 1% down from the Rs.4,527 crores of Q1 FY’11.
India
Turnover at Tata Steel India of Rs.13,658 crores in the first half was 21% up from the Rs.11,308 crores in H1 FY’10. Q2 sales of Rs.7,107 crores were 25% up from the Rs.5,692 crores of Q2 FY’10 and 8% up from the Rs.6,551 crores of Q1 FY’11.
Tata Steel India posted an EBITDA of Rs.6,327 crores in the first half, 67% up from the Rs.3,787 crores in H1 FY’10. Q2 EBITDA of Rs.3,362 crores was 68% up from the Rs.1,998 crores of Q2 FY’10 and 13% up from the Rs.2,965 crores of Q1 FY’11.
Tata Steel India posted robust EBITDA of Rs.3,362 crores in the second quarter on account of higher deliveries and savings achieved on the back of the Company’s continuous improvement initiatives. The underlying EBITDA margin of 38.4%, excluding the Rs.627 crores profit from sales of investments during the quarter, is amongst the highest margins reported in the steel sector globally. Net realisations fell quarter-on-quarter because of softer sales prices caused by increased imports from China. Employee costs rose by Rs.106 crores due to a one-time charge arising out of a change in actuarial assumptions concerning employee benefits.
The Ferro Alloys and Minerals Division posted an operating profit of Rs.201 crores in Q2 FY’11, much the same as the Rs.204 crore in Q1 FY’11. The Q2 figure was 175% higher than the Rs.73 crores posted in Q2 FY’10, driven by improved demand and higher exports.
Europe
Turnover at Tata Steel Europe Limited of Rs.36,098 crores in the first half was 13% up from the Rs.31,996 crores in H1 FY’10. Q2 turnover of Rs.18,387 crores was 10% up from the Rs.16,768 crores of Q2 FY’10 and 4% up from the Rs.17,711 crores of Q1 FY’11.
Tata Steel Europe Limited posted an EBITDA of Rs.2,249 crores in the first half, an increase of Rs.5,903 crores from the EBITDA loss of Rs.3,654 crores in H1 FY’10. Q2 EBITDA of Rs.886 crores rose by Rs.2,688 crores from the EBITDA loss of Rs.1,802 crores of Q2 FY’10 and was 35% down from the Rs.1,363 crores of Q1 FY’11.
South East Asia
NatSteel Holdings
Turnover at NatSteel Holdings of Rs.3,443 crores in the first half was 10% up from the Rs.3,134 crores in H1 FY’10. Q2 turnover of Rs.1,701 crores was 3% down from the Rs.1,761 crores of Q2 FY’10 and 2% down from the Rs.1,742 crores of Q1 FY’11.
NatSteel Holdings posted an EBITDA of Rs.210 crores in the first half, 59% up from Rs.132 crores in H1 FY’10. Q2 EBITDA of Rs.116 crores was 32% up from the Rs.88 crores of Q2 FY’10 and 24% up from the Rs.94 crores of Q1 FY’11.
Tata Steel Thailand
Turnover at Tata Steel Thailand of Rs.1,860 crores in the first half was 28% up from the Rs.1,454 crores in H1 FY’10. Q2 turnover of Rs.988 crores was 21% up from the Rs.817 crores of Q2 FY’10 and 13% up from the Rs.872 crores of Q1 FY’11.
Tata Steel Thailand posted an EBITDA of Rs.70 crores in the first half, 19% down from Rs.86 crores in H1 FY’10. Q2 EBITDA of Rs.14 crores was 83% down from the Rs.82 crores of Q2 FY’10 and 75% down from the Rs.56 crores of Q1 FY’11.
2. Financing Developments:
Raising of additional capital:
The Board of Directors has decided to seek the approval of the shareholders of the Company by means of a postal ballot to raise additional long-term resources through an issue of securities, including ordinary shares, equity shares with differential voting rights, GDRs, debentures, foreign currency bonds, etc. up to Rs.7,000 crores.
Refinancing of senior debt in Tata Steel Europe:
On September 29 Tata Steel UK Holdings Limited (formerly Tata Steel UK Limited) signed a Senior Facilities Agreement (SFA) with a syndicate of 13 banks. This replaced in full the £3.53 billion term loan and revolving credit facilities entered into during the Corus Group acquisition in 2007. The new financing structure is in two parts: a 5-year loan of €2.2 billion and a 7-year loan of €0.9 billion and US$0.4 billion. The revolving credit facilities for working capital purposes were increased to £690 million and will have a tenor of 5 years. On October 7 the older facility was repaid in full from the proceeds of the new facility. Security was released by the older lenders and granted in favour of the new lenders. In accordance with Tata Steel’s foreign exchange risk management strategy, the entire term debt is to be retained in Euros. The new facilities are significantly more flexible than the older agreements, enjoying substantially reduced amortisations over the next four years, lighter financial covenants, and the ability to raise additional working capital and term debt from capital markets to repay the SFA debt.
3. Corporate Developments:
Establishment of Tata Steel Minerals Canada Ltd:
Tata Steel approved participation in the Direct Shipping Ore (DSO) Project of New Millennium Capital Corp (NML) in September 2010. A Joint Venture Company (JVC), named Tata Steel Minerals Canada Ltd, was incorporated in October 2010. The JVC will acquire all the mining claims and assets relating to the DSO Project, carry out detailed engineering and facility construction, and be responsible for the Project’s operations. Tata Steel will own 80% of the JVC and NML the remaining 20%.
Joint Expression of Interest with Government of Laos:
On September 13 Tata Steel, through its wholly owned subsidiary Tata Steel Global Minerals Holdings Pte Limited, signed a joint expression of interest with the Government of Laos for the identification and evaluation of iron ore and coal mines in Laos.
Increased Stake in Riversdale Mining Limited, Australia:
Tata Steel, through Tata Steel Global Minerals Holdings Pte Limited, increased its stake in Riversdale Mining Limited, the listed entity in Australia, from 21.1% to 24.4% by way of open market purchases.
CONSOLIDATED RESULTS IN FIGURES :
| HYE 0910-C | DIF %1 | Dif%2 | ||||
| Net Sales | 5510097 | 2809091 | 2701006 | 4 | 2526982 | 118.05 |
| Other Oprtg Inc. | 73891 | 55528 | 18474 | 200.57 | 12522 | 490.09 |
| SIT & WIP | -171869 | -80859 | -91010 | -11.15 | -32990 | 420.97 |
| Raw Materials | 1918254 | 1040579 | 876563 | 18.71 | 949892 | 101.94 |
| Traded goods | 726982 | 380593 | 346389 | 9.87 | 370265 | 96.34 |
| Employees Cost | 760460 | 382751 | 377709 | 1.33 | 436082 | 74.38 |
| Depreciation | 212204 | 107810 | 104394 | 3.27 | 115352 | 83.96 |
| Other Expen. | 1539669 | 774322 | 772558 | 0.23 | 779075 | 97.63 |
| Total Expen. | 4985700 | 2605196 | 2386603 | 9.16 | 2617676 | 90.46 |
| O P T | 598288 | 259423 | 332877 | -22.07 | -78172 | -865.35 |
| Other Income | 87373 | 81426 | 5947 | 1269.19 | 1794 | 4770.29 |
| Profit B I EI | 685661 | 340849 | 338824 | 0.6 | -76378 | -997.72 |
| Interest | 126130 | 66371 | 59759 | 11.06 | 71718 | 75.87 |
| Profit A I BB EI | 559531 | 274478 | 279065 | -1.64 | -148096 | -477.82 |
| Except. items | 9146 | 3158 | - | #VALUE! | 91132 | -89.96 |
| P B T | 550385 | 271320 | 279065 | -2.78 | -239228 | -330.07 |
| Tax Expense | 174543 | 74497 | 100046 | -25.54 | 32752 | 432.92 |
| P A T | 375842 | 196823 | 179019 | 9.95 | -271980 | -238.19 |
| Extrao. Items | - | - | - | #VALUE! | - | #VALUE! |
| Net Profit | 375842 | 196823 | 179019 | 9.95 | -271980 | -238.19 |
| Minority Interest | -377 | -1026 | 649 | -258.09 | 1741 | -121.65 |
| Shar.of Associa. | -4188 | -32 | -4156 | -99.23 | -2996 | 39.79 |
| Consolid. NPT | 380407 | 197881 | 182526 | 8.41 | -270725 | -240.51 |
| Face Value (Rs.) | 10 | 10 | 10 | 0 | 10 | 0 |
| Paid-up Equity | 90174 | 90174 | 88674 | 1.69 | 88674 | 1.69 |
| Reserves | - | - | - | | - | |
| Basic EPS | 42.63 | 22.04 | - | | - | |
| Diluted EPS | 40.4 | 20.63 | - | | - | |
COMMENTS :
TATA STEEL has pulled it off. Its European operations have turned the corner in a resounding manner. It definitely seems – that there is no further looking back for TATA STEEL. It will be going from strength to strength in coming quarters. While Global steel prices are always a matter for concern, TATA STEEL will remain one of the BEST PRODUCERS of steel and the most profitable producer.
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