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Buy Tata Steel

TSL India produced 1.73 MT in Q3FY12 v/s 1.71 MT in Q2FY12 & 1.75 MT in Q3FY11. Deliveries were 1.62 MT in Q3FY12 V/S 1.65MT in Q2FY12 & 1.64 MT in Q3FY11. EBITDA/Tonne declined to $ 303/tonne v/s $319/Tonne in Q2FY12 & $326/Tonne in Q3FY11. Flat products volume increased 3% y-o-y in line with increase in production volume. Long products sales dropped in Q3FY12 due to lower availability of semis on account of planned shutdowns. Overall net realizations were higher due to increased retail sales and favorable sales mix in Longs.

TSL Europe’s production was 3.62 MT in Q3FY12 v/s 3.53 MT in Q2FY12 & 3.66 MT in Q3FY11. Deliveries were 3.35 MT in Q3FY12 V/S 3.57 MT in Q2FY12 & 3.39 MT in Q3FY11. EBITDA/Tonne declined to ($147)/tonne v/s $95/Tonne in Q2FY12 & $74/Tonne in Q3FY11. The company had a inventory write down to the tune of $143 Mn in the current quarter leading to a net loss on the consolidated level. Steel prices in Europe declined by $45 tonne on sequential basis leading to a lower spread between HRC & blended raw material costs which were 350 Euro/Tonne in Q1FY12 subsequently declining to Euro 170/Tonne in Q2FY12 and further declining to Euro 90/Tonne in the current quarter resulting in a highly negative operating leverage.

South East Asia Operations: Production was 0.64 MT in Q3FY12 v/s 0.73 MT in Q2FY12 & 0.72 MT in Q3FY11. Deliveries 0.66 MT in Q3FY12 V/S 0.79MT in Q2FY12 & 0.78 MT in Q3FY11. Singapore performed better on account of better scrap-rebar gap management and its conversion cost reduction programme, key MRT and Housing Board Projects underway to boost demand further. Thailand Construction industry contracted by 10.4% Q-o-Q in Q3FY12 due to severe floods however it’s expected to grow by 5-10% in FY13.

Capex incurred during the quarter is $596 Mn. Capex Outlook for FY13 – $2.5Bn (Europe: $600 Mn, Jamshedpur: 400-500 Mn, Odisha – $800 Mn & $150Mn on Nippon JV

The company has increased steel prices in India twice in the current quarter (January & February 2012) by Rs 1000/Tonne

This entry was posted on Monday, February 13th, 2012 at 6:41 pm and is filed under Short Term Investments. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

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