Steel Stocks Highlights steel companies tata steel

Disclaimer: Information presented on this site is a guide only. It may not necessarily be correct and is not intended to be taken as financial advice nor has it been prepared with regard to the individual investment needs and objectives or financial situation of any particular person. Stock quotes are believed to be accurate and correctly dated, but www.stockmarketindian.com does not warrant or guarantee their accuracy or date.
www.stockmarketindian.com takes no responsibility for any investment decisions based on recommendations provided on website.
Financial contents like Technical charts, historical charts and quotes are taken from NSE and Yahoo sites.
Note - All quotes are delayed by 15 minutes and unless specified.

Google Adsense Ads are posted on every page of the website so visitors clicking on Ads and going to those links and carrying any financial deal is not at all related to www.stockmarketindian.com and any financial deal should be done on their own sole responsibility.
Please read at www.stockmarketindian.com/disclaimer.php before using any material or advice given at www.stockmarketindian.com
Copyright © 2010 StockMarketIndian.com. All Rights Reserved

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.

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 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

Outlook
While the near-term consolidated performance of Tata Steel could be subdued, expect the second half of 201011 to be better and a good recovery in 2011-12. The stock is currently trading at reasonable valuations of nine times its 2010-11 earnings per share (EPS) of `58 and seven times 201112 estimated earnings ( `74).

From `517.70 levels, analysts see asmall upside of 10-15 per cent over the next one year.
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

Tata Steel Ltd (updated - 20 Aug 2010)
Although Tata Steel reported a good set of numbers for the June quarter, performance of its international operations still remain a cause of worry for most analysts. The company did report a consolidated net profit of `1,825 crore for the June quarter, compared to a net loss of `2,008 crore in the year-ago period, even as revenues jumped 16 per cent yearon-year. But total volumes were up a mere 0.5 million tonnes (mt) to six mt.

The improvement was largely driven by a sharp rise in margins as a result of better steel prices and turnaround of its Corus operations. The worry in the near-term, however, stems from the likely pressure on margins on the back of a decline in steel prices.

European operations, one-off impact
Tata Steel’s performance does looks good compared to last year’s quarter, but its European operation reported adecline in delivery volumes from 3.9 mt in the March quarter to 3.7 mt in the June quarter, which was partly on account of the fire in the Muiden plant. Also, over the same period, Corus’ earnings before interest, taxes, depreciation and amortisation (Ebitda) dropped from $94 a tonne to $79 a tonne.

However, analysts believe core Ebitda per tonne would have been higher at $105 a tonne, if adjusted for such oneoff items as impact of foreign exchange and increased maintenance costs during the fire at the plant.

Margin pressure
While its domestic business is on a strong footing (expected to grow 10-12 per cent), the international business - which accounts for over 70 per cent of the company’s revenue - could feel some pressure.

“We believe margins for steel players would come under pressure as a result of sluggish realisations and rising raw material costs. Although capacity utilisation levels across the globe have been reviving, rising exports from China remain a worry, “ says Ravindra Deshpande, who tracks steel sector at Elara Capital.

The price of long and flat steel products have come down in the recent past by about 10 per cent, compared to the June quarter levels. Additionally, pressure is emanating as contract prices of such raw materials as iron ore and coal are currently quoting 10-15 per cent above average June quarter prices . The combined impact of lower steel prices and higher raw material prices could put pressure on margins, which is likely to be seen over the next two quarters.

Tata Steel Ltd (updated - 01 Sept 2010)
The sale of the mothballed Teeside Cast Products (TCP) for around $500 million has added anew dimension to Tata Steel’s cost-saving and operational rationalisation initiatives, ‘Fit for the future’ and ‘Weathering the storm’.

The 3.9-mtpa (million tonnes per annum) capacity was a drag on the company’s profitability and was also a pressure point politically. The proposed sale to Thailand’s Sahaviriya Steel Industries (SSI) is expected to bring in around `25 per share, say analysts. While Tata Steel will be selling the blast furnace and steel-making facilities, it will still have apart of the bulk terminal, which will be operated as a joint venture between Tata Steel and SSI.

The deal values TCP at around $128 per tonne, a sound valuation for a plant that was mothballed. The initiatives undertaken by the company will also help save around $375 million at Corus. Profits at Corus improved in the June quarter, with earnings before interest, tax, depreciation and amortisation (Ebitda) rising to $105 per tonne, as compared to a loss of $129 per tonne in the same quarter of the previous year.

However, the upcoming quarters are expected to see lower Ebitda, as rising input costs and seasonal low volumes drag the sales numbers. Analysts are even estimating an operating loss. But, the unexpected TCP sale would be a game changer for Corus. Improving price conditions in Europe could also provide an upside for the company.

Analysts at Goldman Sachs point that Tata Steel Europe has less than five per cent exposure to Southern Europe, which is a healthy sign since the area is a major cause for concern. A majority of its shipments are to the UK, Germany and France, which have been far more resilient in the current economic environment. Moreover, Corus has less than 20 per cent direct exposure to construction -the most vulnerable sector in Europe - while a 40 per cent exposure to the strong auto and machinery sector, they add. A single percentage point increase in steel prices in Europe could increase Ebitda by 5.6 per cent.

Hence, the company is gearing to make itself fit when the steel cycle turns.
source - business standard