October 30, 2017

Tata Steel reports results for the quarter and half year ended September 30, 2017

  • Consolidated deliveries of 6.45 million tonnes, up 15 percent YoY and 11 percent QoQ; India deliveries now contribute to 48 percent of group deliveries
  • Consolidated quarterly revenues of Rs32,464 crore, up 20 percent YoY and 5 percent QoQ
  • Consolidated quarterly EBITDA at Rs4,726 crore, EBITDA margin of 14.6 percent
  • Consolidated PAT of Rs1,018 crore from a loss of Rs49 crore last year and Rs921 crore in 1QFY18
  • Gross debt has increased Rs2,447 crore and stood at Rs90,259 crore, mainly due to increase in working capital lines and Forex impact.
  • The liquidity position of the group remains very robust, with approximately Rs19,800 crore in cash and cash equivalents and undrawn bank lines.
  • The capital expenditure for the quarter was around Rs1,834 crore.

Tata Steel Standalone and Consolidated Highlights

(Figures in Rs. crore unless otherwise specified)
As per Ind AS Standalone Consolidated1
Q2FY18 Q1FY18 Q2FY17 Q2FY18 Q1FY18 Q2FY17
Production (million tons) 2 3.03 2.95 2.72 6.24 6.25 5.94
Steel Deliveries (million tons) 3.08 2.75 2.62 6.45 5.83 5.61
Turnover 14,221 14,422 11,718 32,464 30,973 27,120
EBITDA 3,408 2,922 1,991 4,726 4,939 3,093
Pre-Exceptional PBT from Continuing Operations 2,003 1,412 431 2,170 2,291 353
Exceptional Charges (27) (617) (64) (45) (617) (59)
PAT from Discontinued Operations - - - 30 (12) 20
Reported PAT 1,294 506 250 1,018 921 (49)
Other Comprehensive Income (81) (129) 572 (4,234) (3,542) (2,602)
Total Comprehensive Income 1,213 377 822 (3,217) (2,621) (2,652)
EPS (Continuing & Discontinued Operations) (Rs.) 12.87 4.77 2.12 10.04 9.04 (0.96)

1. Long Products and Specialty Steels businesses have been re-classified as held for sale/ discontinued operations. The previous year’s figures have also been re-stated accordingly.
2. Production numbers for consolidated financials are calculated using saleable steel for India, SEA and Liquid steel for Europe

Key Operating and Financial Highlights:

India Operations:

  • Deliveries grew 17 percent YoY and 12 percent QoQ to 3.08 million tonnes in 2QFY18, despite subdued apparent steel consumption growth in India (5 percent YoY and 4 percent QoQ).
  • Revenues during the quarter (net off the impact of excise) are higher 33 percent YoY, primarily due to higher deliveries and improved realisations and 8 percent QoQ due to higher deliveries and higher other operating income.
  • EBITDA for the quarter stood at Rs3,408 crore, registering a 71 percent YoY growth, driven by improved realisations and higher volumes, and 17 percent QoQ growth, primarily due to higher volumes.
  • Sales volume growth was broad-based and across the verticals. Tata Steel Kalinganagar works ramp-up facilitated higher material availability and entry into new segments with better product range.
  • The Automotive segment delivered market-beating volume growth of 34 percent YoY and 25 percent QoQ; high-end automotive steel sales grew 23 percent YoY and 14 percent QoQ.
  • The Branded Products & Retail Solutions segment grew 14 percent YoY and 9 percent QoQ, supported by 14 percent YoY and 16 percent QoQ growth in sales to emerging customer accounts.
  • The Industrial Products, Projects & Exports segment grew 11 pertcent YoY and 8 percent QoQ, with strong growth of 60 percent YoY and 18 percent QoQ in targeted value-added and new segment sales.

European Operations:

  • Liquid steel production of 2.60 million tonnes in 2QFY18 was lower 3 percent YoY and 7 percent QoQ.
  • Deliveries were higher 15 percent YoY and 8 percent QoQ, in part due to one-off sales and supply chain improvements.
  • Revenues were higher 32 percent YoY, reflecting higher deliveries and an uplift in the sales of differentiated products and by 5 percent QoQ
  • EBITDA was £89 million, £38 million lower than the previous year and £63 million lower on a sequential basis, primarily due to lower spreads with higher raw material prices.

South East Asian Operations:

  • Revenue for South East Asia operations increased 22 percent, both YoY and QoQ, to Rs2,424 crore.
  • EBITDA improved to Rs135 crore in 2QFY18 from Rs22 crore in 1QFY18, with higher deliveries and improved spreads.

Corporate Developments:

  • Signed Memorandum of Understanding for a 50:50 joint venture with thyssenkrupp AG to create a leading European steel enterprise
  • The Pensions Regulator has approved the Regulatory Apportionment Agreement in respect of BSPS and payment of GBP550 million has been completed. The BSPS has been now separated from Tata Steel UK and a number of affiliated companies. The next step would be completion of necessary formalities to set up a new scheme with lower risk profile following member consent process led by trustee.
  • Completed the sale of 42- and 84-inch pipe mills in Hartlepool to Liberty House group
  • Acquired full intellectual property rights in Hlsarna technology, which has the potential to reduce energy use and carbon emissions by at least 20 percent, as well as reducing the steel-making costs through lower-priced raw materials

Management Comments:

TV Narendran, managing director, Tata Steel said, “Tata Steel witnessed strong volume growth during the quarter as the smooth ramp up of our Kalinganagar Steel plant coupled with our strong marketing franchise enabled us to expand our customer universe and increase our market share. This is against the backdrop of subdued steel demand during the quarter with slow construction activity, weak rural demand and poor consumer sentiment.

Our growth was broad based, with all verticals registering strong performance. Our Automotive segment grew by 34 percent YoY due to our focus on new grade development and new vehicle models. Our Branded Products & Retail Solutions segment sales grew 14 percent YoY, with strong volume growth in emerging customer accounts. Our Industrial Products, Projects & Exports segment grew 11 percent YoY, including a 60 percent YoY growth in our targeted value added and new segment sales. During the quarter, we developed 27 new products across various customer segments.

Our South East Asian business operations delivered strong operating performance during the quarter with higher deliveries and improved spreads.

We remain positive on the outlook of India as encouraging government reforms are expected to facilitate domestic investment and growth in the coming years. The thrust on tax reforms and transparency will also facilitate the formalisation of economy and serve as tailwind to players like Tata Steel.”

Koushik Chatterjee, group executive director, said, “Globally, there was a recovery in the commodity cycle, with cuts in Chinese steel capacities and stronger demand resulting in improving utilisation levels of mills in China to more than 85 percent. This coupled with recent uptick in the raw material prices has lifted the steel prices across regions.

Tata Steel Group revenues witnessed a sequential growth of 9 percent, primarily driven by increased volumes across the geographies, with India now contributing to 48 percent of overall deliveries. However, consolidated EBITDA declined sequentially due to seasonally weaker performance in our European operations. Gross debt has increased by Rs2,450 crore, mainly due to increase in working capital lines and forex impact. The liquidity position of the group remains very robust, with Rs19,800 crore in cash and cash equivalents. The capital expenditure for the quarter was around Rs1,834 crore.

During the quarter, Tata Steel signed a MOU with thyssenkrupp AG, which marks a major milestone for Tata Steel with regard to wider European portfolio strategy. The combined business will be structured to ensure a sustainable business going forward. We have also completed the Regulatory Apportionment Agreement in respect of BSPS.

We are committed to further growing our business in India while building a long-term investment in strong European portfolio.”

Hans Fischer, MD and CEO, Tata Steel Europe, said, “In a relatively stable market environment, we continued to strengthen our sales mix with deliveries of higher value differentiated products increasing by almost 200 basis points in the last year to about 38 percent of total sales.

This has been made possible by new products we have brought to market. In the past quarter, we launched five new products, including a new range of coated steels for the construction industry, which comply with new environmental legislation while retaining the durability and weather resistance demanded by customers. We also launched a new tube product ideal for manufacturers of trailer axles for heavy goods vehicles.

Meanwhile our continued focus on close working relationships with customers led to us securing a number of orders in the automotive sector, including supplying steel for the outer panels of a sports utility vehicle made by a prestige German manufacturer.”