Tata Steel Q1 Just the Spark, Rebound to Gain Strength
Tata Steel June Quarter Performance (` crore) Region Wise break-up 12% in the quarter, even though turnover rose to ₹ 14,422 crore from ₹ 10,323 crore. Standalone EBIDTA increased 31% to ₹ 2,922 crore.
The stock crossed Rs 600 for the first time in six years, reflecting the Street’s confidence in the company’s turnaround initiatives.
“The Tata Steel Group witnessed an increase of 19% in revenues over last year due to increased capacity in India and ongoing restructuring in Europe. Raw material prices were volatile, particularly coking coal, which rose up to $220/ tonne in April, and has since moved to the $150-$180/tonne range. A marginal decline in steel prices in Europe is expected to lead to lower spreads in second quarter,” said Koushik Chatterjee, group executive director (finance and corporate).
Inapost-earningscallwiththeanalysts,themanagementmaintaineda positive outlook for Indian as well as European operations, citing New Delhi’s thrust on infrastructure and affordable housing. Structural reforms in China would also likely benefit Tata Steel, although the rising rupee is a likely risk. Southeast Asian business for Tata Steel may remain subdued in the medium term due to higher competition.
Against this backdrop, earnings should increase by about 20% between FY17 and FY20.
Analysts expect incremental volume growth from the Odisha plant and brownfield expansion in the Jamshedpur plant. “A smooth ramp up of Kalinganagar facility helped us increase volumes and market share,” said T V Narendran, managing director Tata Steel India and S E Asia.