Consolidated revenue of Rs341bn was higher than our estimate of Rs324bn; led by higher realisations and volumes in its Europe
Higher than estimated volumes led to a marginal outperformance in standalone revenues
Standalone operating profit was lower than our expectation due to lower realisation and higher raw material costs
Adjusted EBIDTA/ton at Corus decreased sharply from US$35 in Q1 FY13 to -US$2 as decline in realizations was higher than the decline in raw material
South East Asia operations EBIDTA was impacted by one-offs
Maintain BUY with a revised 9-month price target of Rs437
|(Rs mn)||Q2 FY13||Q1 FY13||% qoq||Q2 FY12||% yoy|
|Power and fuel costs||(14,047)||(13,906)||1.0||(11,807)||19.0|
|OPM (%)||6.8||10.1||(329) bps||8.4||(162) bps|
|Effective tax rate (%)||322.6||63.5||86.7|
|Other provisions / minority etc||493||808||(39.0)||734||(32.8)|
|Adj. PAT margin (%)||(1.2)||1.8||(296) bps||0.6||(184) bps|
|Extra ordinary items||427||-||-||-||-|
|Ann. EPS (Rs)||(16.7)||24.6||-||8.9||-|
Higher realisations and volume in Europe led to an outperformance in topline
Tata Steel’s topline increased marginally qoq in rupee terms to Rs341bn, higher than our estimate of Rs324bn. Higher volumes and realisations in the European operations led to the outperformance in topline. Standalone Indian operations reported an increase of 8.8% qoq and 4.8% yoy in sales volume to 1.73mn tons. Sales volume at its European operations increased by 6.5% qoq to 3.42mn tons, higher than our estimate of 3.15mn tons. Volumes at its South Asian units increased 6.9% qoq to 0.77mn tons. Average blended realizations in India decreased 5.6% qoq in rupee terms against our expectation of 3%. Realisations in Europe too decreased by 1.7% qoq from US$1,143/ton in Q1 FY13 to US$1,124/ton in Q2 FY13. This was quite higher than our expectation as spot realizations in Europe had declined during the quarter. Realizations at its South East Asia increased marginally by 2.3% qoq to US$861/ton.
Higher raw material costs and a sharp decline in realisations led to an 11.6% decline in EBIDTA/ton
Tata Steel India registered a decline of 9.5% qoq in operating profit to Rs25.2bn, lower than our estimate of Rs27.8bn. The underperformance in operating profit was due to sharp decline in realizations and a jump in raw material costs. OPM during the quarter shrunk 371bps qoq to 27.5%, lowest over the last three years. Raw material costs per ton of steel increased 6.4% qoq to Rs12,646 due to the impact of consumption of external coking coal. The company had to buy coking coal from the external market as the coke ovens are expected to start operations only after December ’12. Power and fuel costs per ton of steel remained flat during the quarter. EBIDTA/ton for the standalone entity declined qoq to Rs16.305 in Q2 FY13.
Blended per ton cost analysis (Standalone)
|Q2 FY13||Q1 FY13||% qoq||Q2 FY12||% yoy|
|Steel production (mn tons)||1.87||1.75||6.9||1.71||9.4|
|Steel sales (mn tons)||1.73||1.59||8.8||1.65||4.8|
|Sales as a % of production||92.5||90.9||96.5|
|Net realisations (Rs/ton)||52,893||56,025||(5.6)||49,769||6.3|
|Cost per ton (Rs/ton)|
|Power and fuel costs||3,397|
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