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Tata Steel Ltd (updated - 28 May 2010)
The fourth quarter marked a turnaround for Tata Steel. The company had a come-back from asluggish performance in the year marred by lower realisations. A synergistic performance of domestic and European operations helped Tata Steel post healthy numbers.

Tata Steel India’s average blended realisation of Rs 41,800 a tonne pushed revenues to Rs 7,100 crore in the March quarter. Also, a reduction in raw material costs (21.7 per cent sequentially) helped earnings before interest, taxes, depreciation and amortisation (Ebitda) grow 38.5 per cent sequentially to Rs 2,890 crore. Lower interest costs and higher other income buoyed net earnings by 48.2 per cent to Rs 2,160 crore.

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Tata Steel Ltd (updated - 18 Feb 2010)
Led by a better-than-expected consolidated results for the December 2009 quarter, Tata Steel’s stock jumped 6.37 per cent to close at Rs 584.90 on Wednesday. Although lower realisations and output resulted in net sales falling 21 per cent (to Rs 26,202 crore) and net profits by 42 per cent (to Rs 472.65) on a year-on-year basis, the market is happy about the improvement at its European operations. This in turn helped the company churn profits in the December quarter after three consecutive quarters of losses.

The biggest worry for Tata Steel Europe is easing now, as it reported a profit at the earnings before interest, tax, depreciation and amortisation (Ebitda) level. Ebitda of $37.4 per tonne was registered this quarter, partly aided by cost-reduction initiatives, as compared to a loss of $52 per tonne in the September quarter. Higher capacity utilisations of 81 per cent compared to 75 per cent in September quarter, along with better realisations, also came to the rescue of European operations (that accounts for 65 per cent of consolidated revenues). With the company planning to mothball its loss-making Teesside operations this month, its expects further improvement in Ebitda.

Here on, the performance will be driven by its European operations, as cost pressures are increasing due to higher cost of raw materials along with mild recovery in the steel demand in Europe.

Although, the company has completed the feasibility study for mining iron ore in Canada and is also likely to start coking coal production in Mozambique by end-2011, benefits will only be felt in the long run. Also, its high debt-equity of about 1.6 times (gross debt of $12.9 billion) will be among the key things to watch.

Considering the net loss of Rs 4,443 crore for nine months ending December 2009, analysts are not expecting a significant improvement in 2009-10. However, they estimate an EPS of Rs 80 for 2010-11 and Rs 120 in 2011-12, which values the stock at a PE of 7 and 5, respectively. Considering that analysts have put a price target of Rs 700-750 for Tata Steel, there seems to be room for upside.
source - BS

Corus, too, joined the party with a profit in its consolidated result for the quarter. International operations’ ebitda of Rs 1,643 crore, against losses in the same period in the previous year, helped Corus to come out of the red.

Improved capacity utilisations and cost-saving measures did the trick in the March quarter. However, for the entire year, the group posted a loss of Rs 2,009.22 crore, against last year’s profit of Rs 4,950 crore due to lower revenues and operating profit.

Going forward, steel prices are expected to remain volatile, as global uncertainties continue to bog markets. Analysts point that the Chinese have stopped building excess capacities and will be reducing exports, which will eventually cause the price fall. In the European market, consumption is likely to grow 19 per cent in CY10. Inventory levels are still low, with imports subdued and currency weak. Given this background, the Tata Group will be looking at a capacity utilisation of 85 per cent with costsaving measures. So, raw material prices will be the key consideration factor. Analysts expect that a sharp fall in prices will also lead to a fall in raw material prices. Hence, this will nullify the impact on margins. In the long term, the profitability mix is seen as continuously improving for Tata Steel.

Tata Steel India’s contributions, which are more profitable, will increase to 40 per cent from 20 per cent with capacity going up 7-10 million tonnes in a year’s time. Nonintegrated British operations are being pruned and capacity will fall from 20 million tonnes to 15 million tonnes.
source - business standard

Tata Steel: Adding mettle to operations (updated - 16 July 2010)
Tata Steel will issue additional shares and warrants on a preferential basis to Tata Sons. The move to issue around 15 million equity shares and 12 million warrants could see dilute Tata Steel’s equity by around 2.8 per cent.

The shares will be priced around Rs 594 per share — a17.5 per cent premium to the current market price. This is expected to mop up Rs 1,600 crore after the conversion of warrants, according to analysts.

On the face of it, the amount looks inconsequential as the consolidated debt on the books of Tata Sons is around Rs 53,100 crore. The debt to equity ratio would, however, come down from 2.3 times to 2.15 times and lower the interest outgo. Moreover, Tata Steel paid 70 per cent debt obligations for financial year 2011 in May.

There is expectation it will repay more debt.

The company is expected to see strong volume growth and stable operating profit margins in financial year 2011, according to analysts. In fact, analysts at Ambit Capital expect sales volume of 15 million tonnes, with the first half being more robust than the second (as the winter season could reduce demand). Earnings before interest, tax, depreciation and amortisation (Ebitda) margins are expected to stabilise at lower levels. The strong $96-a-tonne Ebitda margins would stabilise to a more rational $65 a tonne level within the current financial year, said analysts.

Fortunes of Corus will remain crucial for the company as Tata Steel India’s operations, which will contribute around 33 per cent of volume sales and 60 per cent of consolidated Ebitda, are expected to remain stable. Analysts say the stability in earnings is expected to continue and the company will not see the shocks it faced in FY2009, when realisations crashed even when raw material prices continued to remain high and the drag on profits continued into the first half of 2010. A more practical quarterly raw material pricing will ensure this, they say.
source - business standard