Tata Steel Profit Tops Estimates On One-Time Gain In March Quarter

Tata Steel Ltd. returned to a profitable fourth quarter, surpassing analyst estimates amid strong demand and buoyant global prices, aided by a one-time gain in the quarter ended March.

The Mumbai-based steelmaker’s profit rose to Rs 10,190 crore for the three months through March, compared with a loss of Rs 1,294 crore in the same quarter last year, Tata Steel said in an exchange filing today. That is higher than the Bloomberg consensus estimate of Rs 2,271.8 crore. The bottom line was aided by an exceptional gain of Rs 11,376 crore, mostly as a result of restructuring of its U.K. pension scheme.

Nearly 30 percent of the original pensioners have shifted to the public provident fund while 70 percent have chosen to move to Tata Steel’s new pension scheme which has a different structure with limited liabilities, TV Narendran, Managing Director and Chief Executive Officer of Tata Steel told BloombergQuint. “That allows us to recognise a surplus which is a one-off.”

Revenue rose 6.7 percent to Rs 36,130 crore as compared to the same quarter last year. This fell short of the Bloomberg consensus estimate of Rs 32,787 crore.

Operational Beat

Earnings before interest, tax, depreciation and amortisation rose 13.4 percent to Rs 6,499 crore. The operating margin expanded 100 basis points to 18 percent during this period. Operational performance surpassed estimates led by Oman and India businesses, the company said.

“During the year, our India business did very well with industry leading Ebitda margins and strong cash flows. Europe performance is also improving with restructuring, plant upgrades and support from better pricing in EU,” Koushik Chatterjee, executive director and chief financial officer at Tata Steel said in the press release accompanying the earnings filing.

The company said it remains bullish on steel prices and spreads with improving demand situation in India but added that it is “closely watching the developments in global steel trade because of U.S. protectionist measures”.

Other Highlights

• Standalone Ebitda per tonne rose 16 percent quarter-on-quarter to Rs 15,917
• Standalone volumes stood at 3.34 million tonnes versus 3.3 MT last quarter due to blast furnace outage at Kalinganagar.
• The steelmaker has guided for a capital expansion of Rs 8,000 crore for the financial year 2018-19.
• It expects sales volumes for India at 12.5 million tonnes and Europe at 10 million tonnes for FY19.

Bhushan Steel Acquisition

Tata Steel recently has received approval from the National Company Law Tribunal to acquire debt-ridden Bhushan Steel Ltd. Tata Steel had offered Rs 35,200 crore in cash, and conversion of the remaining debt of about Rs 27,000 crore into equity, to take over Bhushan Steel, in which the company will gold 72.7 percent stake.

Ahead of the earnings announcement, shares of the steel producer closed 0.32 percent lower on the BSE.