Tata Steel Q2 net profit sharply up at Rs917 crore

Tata Steel Ltd has reported a sharp increase in second quarter net profit for the financial year at Rs917 crore ($144 million), helped by higher steel prices and market share at home, despite challenges at its European operations.

Tata Steel had reported a net loss of Rs364 crore during the year-ago quarter.

Consolidated turnover of Tata Steel group increased to Rs36,645 crore during the second quarter of the current financial year  from Rs32,805 crore in Q1 FY'14 and Rs34,133 crore in the second quarter of the previous financial year.

Earnings before interest, taxes, depreciation and amortisation (EBITDA) for Q2 FY'14 increased to Rs3,784 crore from Rs3,755 crore in Q1 FY'14 and rose significantly from Rs2,453 crore in Q2 FY'13.

Group steel deliveries in the second quarter of the financial year 2013-14 stood at 6.48 million tonnes, compared to 6.08 million tonnes in the previous quarter and 6.07 million tonnes in the year-ago quarter.

Consolidated net profit for the group for the first half of the current financial year (April 2013-September 2014) stood at Rs2,056 crore, against a net loss of Rs234 crore during the first half of the previous financial year.

Group turnover for the first half of the financial year (H1 FY'14) stood at Rs69,450 crore against Rs67,954 crore in H1 FY'13.

(EBITDA) for the first half of the financial year stood at Rs7,539 crore, against Rs6,034 crore in H1 FY'13.

Group steel deliveries during the first half of the financial year (APRIL-September 2013) increased to 12.56 million tonnes from 11.74 million tonnes in H1-FY'13.

Tata Steel said the turnaround was driven by a steady ramp-up of the Indian operations and improved performance at the European and South East Asian operations.

Europe is Tata Steel's top market and production centre, but its market there seemed to be shrinking since it gained an entry through its $13 billion acquisition of Corus in 2007.

However, Tata Steel said operations in the region were stabilising and production there grew sequentially some 3 per cent in the three months ended 30 September.

Quarterly operating income from the region improved to Rs554 crore, compared with an operating loss of Rs40 crore a year earlier.

"The investments in our asset base are proving their worth in what continues to be a challenging market," Karl-Ulrich Kohler, chief executive of Tata Steel's European operations, said in a statement.

The Indian operations continued the steady ramp-up of its expanded capacity despite the seasonally weak quarter, exacerbated by heavy monsoons and weaker economic conditions.

''Overall market conditions weakened during the last quarter, exacerbated by heavy monsoons and the credit slowdown affecting our customers. Despite these difficult conditions, we were able to increase deliveries by 18 per cent over last year and increase market share on the back of strong customer relationships, our superior product portfolio and the strength of our distribution network.

The rolling facilities of the brownfield expansion at Jamshedpur ramped up to full capacity towards the end of the second quarter. Our greenfield project in Odisha continues to make good progress though there have been some weather related disruptions due to the Phailin cyclone and the subsequent floods. The South East Asian operations have stabilised and should deliver strong performance over coming quarters,'' T V Narendran, managing director of Tata Steel India and South East Asia, said.

Tata Steel was adjudged the Best Performing Integrated Steel Plant in the country for 2011-12 by the prime minister's trophy assessment team. At the same time, eleven employees of Tata Steel were conferred with the prestigious Prime Minister's Shram Awards for the year 2012, the company said in a release.

Tata Steel's South East Asian operations were partly affected by a furnace shutdown in Singapore, which came back into operation from August. Volumes improved significantly at both NatSteel and the Thai operations.

European steel demand is expected to pick up slowly in the third quarter and to continue to grow as steel-using sectors recover, the company said.

Tata Steel, which is trying to cut costs and focus on high-margin products, said last month that it may cut about 500 jobs in the UK under plans to restructure part of its business supplying construction and engineering industries.

Last month it won a contract to supply Britain's Network Rail with more than 95 per cent of its rails for at least five years. The contract is significant for the company following a $1.6 billion write-down announced in May, mainly due to weak demand in Europe.

''The improvement in production continued into the second quarter as our operations stabilised following the restart of the Port Talbot blast furnace. This fed through to a stronger financial performance in the first half, despite margins being squeezed in the September quarter. The investments in our asset base are proving their worth in what continues to be a challenging market. We are focused on maintaining our momentum and will continue to strengthen partnerships with customers by offering them more premium products and services,'' Karl-Ulrich Kohler, MD & CEO of Tata Steel Europe, said.