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Tata Steel: Domestic Realisation Disappoints, Loss continues... - Views on News from Equitymaster
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  • Dec 19, 2016 - Tata Steel: Domestic Realisation Disappoints, Loss continues...

Tata Steel: Domestic Realisation Disappoints, Loss continues...
Dec 19, 2016

Tata Steel has announced its second quarter results of financial year 2016-2017 (2QFY17). The company has reported a 0.1% increase in the topline while the bottomline was in red in 2QFY17.

Performance summary:
  • Total Income from operations increased marginally by 0.1% YoY. This is on the back of an increase in volumes from India. The operations and ramp-up at Tata Steel Kalinaganagar helped increase overall deliveries. However, realisation from Indian operation disappointed with realisation/tonne falling by 2.1% YoY. Similarly, volumes from European and South-east Asia operation declined by 16.7% YoY and 5.8% respectively. However, blended realisations improved marginally during the quarter by 3.6% YoY and 4.3% YoY from these region.
  • Operating profit increased by 66.5% YoY and operating margin stood at 10.8%. This is largely due to significant improvement in the operating performance at Tata Steel Europe. However, operating profit reduced by 8.5%QoQ basis. This is on the back of lower realisations in India and ramp-up costs of Kalinganagar. Due to the ramp-up phase in the first full quarter of operations, operating costs and margins were adversely affected.
  • Other income declined by 14.2% YoY on the back of exchange impact on translation. Depreciation and finance cost increased by 11.5% YoY and 22.7% YoY respectively on the back of Kalinganagar capitalisation and interest cost on Kalinganagar loan.
  • Exceptional items of Rs 593 million is on the back of employee separation compensation.
  • The company registered a net loss of Rs 1.72 billion (before extraordinary item) and net loss of Rs 35.27 Billion after considering loss from discounted operation.

    Consolidated Financial Performance
    (Rs m) 2QFY16 2QFY17 Change 1HFY16 1HFY17 Change
    Total Income 274,563 274,712 0.1% 554,817 538,773 -2.9%
    Total Expenses 256,723 245,012 -4.6% 511,852 476,653 -6.9%
    Operating profit (EBITDA) 17,841 29,700 66.5% 42,966 62,120 44.6%
    Operating profit margin (%) 6.5% 10.8% 7.7% 11.5%
    Other income 1,263 1,084 -14.2% 1,883 2,452 30.2%
    Interest 11,001 13,511 22.8% 22,470 24,218 7.8%
    Depreciation 13,164 14,677 11.5% 26,535 27,094 2.1%
    Profit before tax & exceptional items -5,061 2,597 -4,157 13,259
    Share of profit /(loss) of JVs & Associates -625 -91 -562 51
    Exceptional Item 65,150 -593 65406 -2271
    Tax -1,682 3,634 -675 11,038
    Net profit 61,145 -1,720 61,362 2
    Loss from Discontinued Operations -5,051 -33,553 -8,437 -32,326
    Consolidated Net Profit 56,094 -35,273 52,925 -32,325
    Net profit margin (%) 20.4% -12.8% 9.5% -6.0%
    No. of shares (m) 971
    Basic diluted earnings per share (Rs) ^ -88.6
    P/E ratio (x) * N.A

    (^annualised, * on trailing twelve month earnings)

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