Tata Steel's strong show in Europe comes as a big surprise

Tata Steel’s June quarter numbers beat analysts estimates and could well lead to strong upgrades, which, in turn, could perhaps attract strong buying in the company’s stock. The steel maker reported a profit after tax of Rs 1,139 crore against a consensus estimate of Rs 400 crore on the back of strong operational performance of its European business, while its Indian operations also reported a steady and robust performance.

The main highlight — and the surprise — of the results was an improved performance in Europe. The business reported EBIDTA (earnings before interest, depreciation and tax) of Rs 777 crore, 25% higher than a year ago, and 27% more than the quarter to March. The business generated higher EBIDTA despite a marginal drop in volumes due to cost controls and higher average selling price. The average selling prices, or realisations, for its European business were 5% higher quarter on quarter. Thanks to higher realisation and cost controls, EBIDTA per ton was Rs 2,475 crore versus Rs 1,792 in the previous quarter.

EBIDTA for its Indian operations was Rs 2,897 crore, 4% up year on year and 11% down quarter on quarter due to seasonality. Despite lower steel prices than in the June quarter last year, the company was able to report improved EBIDTA due to higher volumes. Volumes rose 26% year on year due to augmented capacity. Another positive is that average realisations were also higher by 5% on a sequential basis.