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Tata Steel: Conference call extracts - Views on News from Equitymaster
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Tata Steel: Conference call extracts
Feb 13, 2009

We recently attended the 3QFY09 results conference call of Tata Steel. Here are the excerpts of the same. 3QFY09 performance: The standalone topline declined by 3.5% YoY, mainly on account of lower realizations and volumes. The total steel sales volumes declined by 13.8% YoY during the quarter mainly on account of slowdown in demand and shut down of mill for 17 days which caused lower production of HR products. The operating margins declined by 10% to 30.8 mainly on account of increased operating expenditure. The operating expenses grew at 13% YoY, led by higher raw material prices and staff costs. Increase in raw material prices increased was mainly on account of impact of higher coking coal prices during the quarter. The average cost of production grew by around Rs 600 per tonne on a QoQ basis. The net profits (after extra ordinary income/ expenses) declined by 56.4% YoY led by fall in operating profits. Furthermore, higher depreciation charges and forex losses have adversely impacted the profits. Forex losses during the quarter stood at Rs 1.3 bn as against the profit of Rs 479 m in corresponding quarter last year

Capex: The company has spent nearly Rs 21 bn during 9mFY09 and plans to spend around couple of billion rupees during 4QFY09. The company has estimated a capex of around Rs 35 bn to Rs 40 bn for FY10. Tata Steel will continue with its expansion program at the Jamshedpur plant that will result into total capacity of 10 MTPA. The first phase of greenfield project at Orissa of 3 MTPA will also be persisted with, hoping to complete the same by 2010.

Balance Sheet numbers: The net debt of company has increased from Rs 215 bn at the end of September 2008 to around Rs 240 bn at the end of December 2008. The cash balance at the end of 3QFY09 stood at Rs 15 bn. The company has not deployed liquid funds into any of its subsidiaries during the quarter. The liquidity position at all its subsidiaries in India, South East Asia and Europe is at comfortable level. As per the company there was no breach of any debt covenants during the quarter and is not even likely to be happen in short term.

Future projections: The company expects a sales volume of around 6.5 m tonnes as against the annual production of 6.8 m tonnes during FY10. It expects the demand to remain low and the price of steel between Rs 28,000 and Rs 30,000 per tonne in short term. The demand for long products is likely to be strong on account of greater infrastructure push by government.

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