Tata Steel: Operating margins rise sharply - Views on News from Equitymaster

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Tata Steel: Operating margins rise sharply

Oct 18, 2000

Tata Steel has posted a sharp rise in operating margins for the quarter ended 30th September 2000. The company has benefited from better realisations and greater cost control. As a result, even as topline grew by only 10% or so, the bottomline (pre tax and extraordinary items) race ahead by 173%.

(Rs m) 2QFY00 2QFY01 Change
Sales 17,075 18,703 9.5%
Other Income 126 207 64.2%
Expenditure 14,327 14,414 0.6%
Operating Profit (EBDIT) 2,748 4,289 56.1%
Operating Profit Margin (%) 16.1% 22.9%  
Interest 837 684 -18.4%
Depreciation 1,060 1,146 8.1%
Profit before Tax 976 2,667 173.1%
Other Adjustments (248) -1,428  
Tax 75 89 18.4%
Profit after Tax/(Loss) 654 1,150 75.9%
Net profit margin (%) 5.3% 13.8%  
No. of Shares (eoy) 368.4 368.4  
Diluted Earnings per share#* 9.79 27.99  
*(annualised)      
# excluding extraordinary income      

One surprise in the results is the decline in interest costs. It was anticipated that the company would incur higher interest expenditure on account of the commissioning of the CR mill.

In terms of volumes, the company sales were flat, implying that the growth came from higher realisations. Export turnover, which presently earns higher realisations, improved by over 17%.

The sustained rise in the company's operating margins is especially commendable. It is anticipated that in coming years, better cost control and a more high value product mix will enable the company to sustain these margins.

The stock presently trades at Rs 88, implying a P/e multiple of 3x.


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