Tata Steel Ltd clearly beat estimates for Q4FY18. The company reported strong growth on the revenue and operating fronts. Revenue grew by 2.3% yoy to Rs36,132cr (expectation Rs34,423cr). EBITDA stood at Rs6,579cr, down 5.8% yoy against estimates of Rs5,986cr. EBIDTA margin fell by 157bps yoy to 18.2%. Net Profit stood at Rs3,263cr against an estimate of Rs2,300cr.
Segmental Revenue for the quarter was as follows:
Tata Steel India - Rs16,281cr (down 4.9% yoy)
Tata Steel Europe - Rs16,208cr (up 6.3% yoy)
South East Asian operations - Rs2,543cr (up 14.5% yoy)
Segmental EBITDA for the quarter was as follows:
Tata Steel India - Rs4,823cr (up 11.5% yoy)
Tata Steel Europe - Rs1,154cr (down 41.5% yoy)
South East Asian operations - Rs106cr (down 31.2% yoy)
The unplanned shutdown of the Blast Furnace at Kalinganagar impacted domestic production as the facility was shut for ~7-10 days.
EBITDA per tonne at the standalone level stood at Rs16,023 per tonne for the quarter, an increase of 19% yoy. EBITDA per tonne at the consolidated level stood at Rs10,768 per tonne for the quarter, an increase of 5% yoy
Tata Steel India launched 38 new products in FY18. Enriched products accounted for 68% of sales in India, while branded products contributed 46% of domestic revenues.
EBITDA for Tata Steel Europe rose sharply by 82.6% qoq on account of higher realisations in 4QFY18 and lower maintenance cost for planned outages.
Tata Steel received NCLT approval for its resolution plan for Bhushan Steel. The acquisition has also received approval from CCI.
The JV with ThyssenKrupp is progressing well and binding agreeements are expected to be signed in Q1FY19.
Conference Call Highlights
The management is confident of improving operating metrics at the newly acquired Bhushan Steel facility. The management also highlighted that Bhushan Steel would be able to use slabs from the Kalinganagar plant as inputs, providing operational synergy between the two plants. By management’s estimation, they could ramp up the production of Bhushan Steel from 3mtpa at present to 5mtpa, as well as improve profitability to ~Rs10,000 EBITDA per tonne.
The management also highlighted that the Bhushan steel facility has adjoining land that could be used for brownfield expansion that would help eventually raise capacity of the facility to 8mtpa from 5.6mtpa at present. The management states the fair value for the Bhushan steel acquisition at Rs44,000cr and therefore feels that their bid of Rs35,200cr was reasonable.
The management stated that they have a long term aim to target a debt-to-EBITDA and debt-to-equity ratio of ~3x and 1-1.2x respectively. At the end of FY18, the debt-to-EBITDA and debt-to-equity ratio stood at 4.2x and 1.5x respectively. This is expected to increase in FY19, as the company is planning on raising Rs16,500cr in debt to help Bhushan Steel ramp up production.
Tata Steel Ltd ended at Rs. 622.05, down by 2 points or 0.32% from its previous closing of Rs. 624.05 on the BSE.
The scrip opened at Rs. 627 and touched a high and low of Rs. 632.50 and Rs. 617.20 respectively. A total of 89,95,574 (NSE+BSE) shares were traded on the counter. The stock traded below its 200 DMA.
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