Mumbai: Tata Steels June quarter performance improved, but earnings fell short of Street estimates.
Higher than anticipated revenues, paced by increased realisation across geographies and aided in part by the consolidation of Bhushan Steels financials, did not translate into commensurate profits.Net profit for the quarter ended June was Rs 1,934 crore, up 53 per cent year-on-year, but sharply below expectations of Rs 2,700 crore.The Tata Steel stock, which has already corrected more than a fifth from its peak, factors in the negatives.
Yet, the earnings do not offer any meaningful triggers.
Further, the sharp rise in total debt to Rs 1.16 lakh crore up 27 per cent in the last one quarter will continue to weigh with analysts until the Bhushan Steel buyout starts contributing meaningfully.Some of the synergies have already started kicking in and there is a lot of alignment that is going on in the commercial space.
Bhushan Steel is benefitting by getting coal through Tata Steel system, and its also getting the benefit of shipping through the Tata Steel system, said TV Narendran, managing director at Tata Steel.
At the same time, Bhushan steel has a value-added mix, which is helping Tata Steel as well.
Overall, its on track.The company will be incurring capital expenses of Rs 7,000- Rs 8,000 crore in the year.
Tata Steel also pointed out that while the demand from steel consuming sector in India remains strong, rising imports remain a cause of concern.Bhushan Steels financials were consolidated with Tata Steels from May, although the contribution was small.
It contributed 5.6 per cent to the total revenues and 1 per cent to total EBIDTA.Bhushan Steel and Tata Steels Southeast Asian operations also pulled down the overall EBIDTA/tonne a ratio used to measure operational performance.
Overall EBIDTA/tonne at Rs 10,011 was marginally lower than expected.
However, it was in line for the Indian business and higher than expected for the European business each accounting for 44 per cent of the total revenues.In the June quarter, Tata Steels total sales were Rs 37,832 crore, up 22 per cent year on year, and far ahead of expectations because of higher realisations across geographies.However, higher cost of raw materials affected margins.
EBIDTA was 33 per cent higher, but marginally lower than expected.
EBIDTA margin at 17.3 per cent disappointed.