OREANDA-NEWS. Tata Steel group today declared its consolidated financial results for the first half and second quarter ended September 30, 2013. The positive momentum in earnings continued even in a seasonally weak period as the group net profits for the second quarter came in at Rs917 crore compared to the net loss of Rs364 crore in the previous year, while the net profit for the first half of this year was Rs2,056 crore compared to Rs234 crore in the first half of last year. This turnaround was driven by the steady ramp-up of the Indian operations and improved performance at the European and South East Asian operations.

Group performance highlights

Group steel deliveries in H1 FY 2013-14 (H1 FY14) increased to 12.56 million tonnes from 11.74 million tonnes in H1 FY 2012-13 (H1 FY13). Deliveries in Q2 FY 2013-14 (Q2 FY14) were 6.48 million tonnes compared to 6.08 million tonnes in Q1 FY 2013-14 (Q1 FY14) and 6.07 million tonnes in Q2 FY 2012-13 (Q2 FY13).

Group consolidated turnover in H1 FY14 was Rs69,450 crore versus Rs67,954 crore in H1 FY13. Q2 FY14 turnover increased to Rs36,645 crore from Rs32,805 crore in Q1 FY14 and Rs34,133 crore in Q2 FY13.

H1 FY14 group EBITDA was Rs7,539 crore compared to Rs6,034 crore in H1 FY13. Q2 FY14 EBITDA increased to Rs3,784 crore from Rs3,755 crore in Q1 FY14, and rose significantly from Rs2,453 crore in Q2 FY13.

Group profit after tax (after minority interest and share of profit of associates) in H1 FY14 was Rs2,056 crore versus Rs234 crore in H1 FY13. Profit after tax in Q2 FY14 was Rs917 crore compared to Rs1,139 crore in Q1 FY14 and a loss of Rs364 crore in Q2 FY13.

The group's basic and diluted earnings per share (EPS) for H1 FY14 surged to Rs20.26 from Rs1.48 in H1 FY13. EPS in Q2 FY14 came in at Rs8.98 compared to Rs11.28 in Q1 FY14 and a loss of Rs4.21 in Q2 FY13.

Cash and cash equivalents as on September 30, 2013, were Rs12,779 crore, and net debt was Rs64,334 crore. Total liquidity including undrawn credit lines was Rs17,500 crore.

India

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

Flat products, merchant mill and new bar mill achieved their best-ever, half-yearly production. The rolling facilities associated with the 3mtpa brownfield expansion at Jamshedpur were ramped up to full capacity towards the end of the quarter.

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 by the Government of India.

Deliveries increased by 22 percent to 4.04 million tonnes in H1 FY14 from 3.32 million tonnes in H1 FY13 with the ramp-up of the expansion in Jamshedpur. Q2 FY14 deliveries were 2.04 million tonnes versus 2 million tonnes in Q1 FY14, and 1.73 million tonnes in Q2 FY13.

Sales of flat products were 5 percent higher than the previous quarter and 40 percent higher compared to H1 FY13, with strong sales across product and customer categories. In the long products segment, the company increased the sale of value-added products despite the slowdown across end-user sectors.

Turnover in H1 FY14 was Rs19,376 crore compared to Rs18,059 crore in H1 FY13. Q2 FY14 turnover increased to Rs9,921 crore from Rs9,455 crore in the previous quarter, and Rs9,151 crore in Q2 FY13.

H1 FY14 EBITDA was Rs6,099 crore, up by 12 percent from Rs5,459 crore in H1 FY13. Q2 FY14 EBITDA was higher at Rs3,202 crore compared to Rs2,897 crore in Q1 FY14 and Rs2,669 crore in Q2 FY13. The EBITDA margin increased to 32 percent in Q2 FY14 from 31 percent in the last quarter and 29 percent in Q2 FY13.

Profit after tax in H1 FY14 was Rs2,915 crore, an 8 percent increase from Rs2,707 crore in H1 FY13. Q2 FY14 profit was Rs1,559 crore; higher than Rs1,356 crore in Q1 FY14 and Rs1,351 crore in Q2 FY13.

Basic EPS in H1 FY14 increased by 8 percent to Rs29.11 from Rs26.95 in H1 FY13. EPS in Q2 FY14 was Rs15.59, an improvement compared to Rs13.51 in Q1 FY14 and Rs13.44 in Q2 FY13.

Europe

Operating performance in Europe continued to improve. Stabilising operations led to the highest like-for-like quarterly production for five years. EBITDA fell on a sequential basis as margins were squeezed in the second quarter.

Production in Q2 FY14 increased to 3.86 million tonnes from 3.74 million tonnes in the previous quarter. Q2 FY14 production was 16 percent higher than the 3.34 million tonnes produced in Q2 FY13.

Deliveries totalled 6.6 million tonnes in H1 FY14, compared to 6.63 million tonnes in H1 FY13. Q2 FY14 deliveries increased by 10 percent to 3.46 million tonnes from 3.14 million tonnes in Q1 FY14, and by 1 percent from 3.42 million tonnes in Q2 FY13.

Sales of differentiated products rose by 13 percent in H1 FY14 compared to the previous year, highlighting the success of the company's strategy in a fiercely competitive market.

Turnover in H1 FY14 was Rs39,581 crore versus Rs40,720 crore in the previous year, reflecting the decline in average selling prices. Q2 FY14 turnover increased to Rs21,149 crore from Rs18,432 crore in Q1 FY14 and Rs20,314 crore in Q2 FY13.

H1 FY14 EBITDA was Rs1,331 crore, a significant improvement from Rs580 crore in H1 FY13. Q2 FY14 EBITDA was Rs554 crore compared to Rs777 crore in the previous quarter and the EBITDA loss of Rs40 crore in Q2 FY13. The improvement over the previous year arose from the revival of production following the reopening of the Port Talbot blast furnace and from the continuing efforts to reduce costs and make the European operation an all-weather business.

The quarter also marked some important customer wins and product innovations. The company secured orders for the supply of high-quality rail for a new, high-speed line linking the two holy cities of Mecca and Medina in Saudi Arabia. Tata Steel's UK operations have started supplying several grades of stronger steel that help to further reduce vehicle weight and thereby increase vehicles' fuel efficiency.

South East Asia

The 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.

H1 FY14 deliveries totalled 1.82 million tonnes, a 22 percent increase over the 1.49 million tonnes in H1 FY13. Q2 FY14 deliveries were 0.96 million tonnes, up from 0.86 million tonnes in Q1 FY14 and 0.77 million tonnes in Q2 FY13.

Turnover in H1 FY14 was Rs8,086 crore compared to Rs6,878 crore in H1 FY13. Q2 FY14 turnover was Rs4,179 crore versus Rs3,908 crore in Q1 FY14 and Rs3,506 crore in Q2 FY13.

EBITDA almost doubled to Rs222 crore in H1 FY14 from Rs115 crore in H1 FY13. Q2 FY14 EBITDA was Rs129 crore, up from Rs93 crore in Q1 FY14 and Rs20 crore in Q2 FY13.

Financial performance analysis

Consolidated financial results summary (under Indian GAAP) for the half year and second quarter ended September 30, 2013.

Executive comment

TV Narendran, managing director of Tata Steel India and South East Asia, said: “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 percent 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.”

Dr Karl-Ulrich Kohler, MD and CEO of Tata Steel in Europe, said: “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.”

Koushik Chatterjee, group executive director (finance and corporate), said: “The Tata Steel group continued to maintain its earnings momentum in spite of seasonal weakness in Europe. The year-on-year improvement is evident with a 300 basis points increase in the group EBIDTA compared to the corresponding quarter of the previous year. The group cash flows from operations for the quarter were also very strong as we continued to focus on internal initiatives including working capital and spend management. Capital expenditure on the greenfield capacity in Odisha remains the key priority for the group's capital deployment and we have spent around Rs4,500 crore in the first half on this project. We continue to maintain adequate liquidity levels backed by project financing for the planned capex and track the currency movements to calibrate our hedging policy accordingly.”