Tata Steel Profit Boosts War Chest for Asset Buys, Expansion
Tata Steel plans to double production capacity in India.
(Bloomberg) -- Tata Steel Ltd. said third-quarter earnings jumped more than fivefold, replenishing the company’s coffers as it plans to double production capacity in India and bid for ailing mills under a government-ordered program.
The Mumbai-based steelmaker’s profit rose to 12.9 billion rupees ($201 million) for the three months through December, from 2.43 billion rupees a year earlier, according to a statement Friday. That compares with the average of 12.88 billion rupees from analyst estimates compiled by Bloomberg. Revenue climbed 15 percent to 334.5 billion rupees.
The unit of Tata Sons Ltd. is doubling down on India after selling some unprofitable businesses in Europe and agreeing to tie up with Thyssenkrupp AG for the rest of the operations. The shift in focus has come at a time when the South Asian nation is spending trillions of rupees to build up infrastructure, boosting prospects of steelmakers. Tata Steel also plans to raise as much as $2 billion in a rights issue that would allow it to snap up assets being sold under the country’s insolvency resolution process.
Global steel mills are enjoying bumper profits after a government crackdown on bloated capacity in China cut exports from the world’s biggest supplier and pushed up prices. ArcelorMittal, the world’s largest steelmaker, chalked up its highest annual profits since 2011, while Posco saw its income jump 60 percent, and India’s top producer JSW Steel Ltd. reported record quarterly earnings.
“Globally steel prices have been buoyant with improved trade position in China along with cost push from raw materials,” Managing Director T.V. Narendran said in a separate statement. “Our focus on India continues as we look to expand our Kalinganagar site as well as pursue inorganic growth opportunities.”
The company will look to “opportunistically” raise capital and improve its financial capability, said Chief Financial Officer Koushik Chatterjee. Tata Steel’s liquidity position remains robust with 225.44 billion rupees in cash and equivalents and undrawn bank lines, he said.
Among Indian producers, both JSW Steel and Tata Steel shares have soared more than 50 percent in the past year, while Steel Authority of India Ltd. is up almost 40 percent on optimism over demand generated by the government’s infrastructure building program.
Tata’s Kalinganagar plant, which has a capacity to produce 3 million metric tons a year, shut its blast furnace for unplanned major repairs following a sudden failure in the auxiliary equipment, the company said in the statement. The company expects to restart the furnace in the next seven to 10 days and is ensuring that it meets customer commitments from existing inventories and the Jamshedpur plant, it said.
To contact the reporter on this story: Swansy Afonso in Mumbai at safonso2@bloomberg.net.
To contact the editors responsible for this story: Jason Rogers at jrogers73@bloomberg.net, Liezel Hill, Alex Devine
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