Tata Steel, one of the country's largest steel companies, is expected to report dismal performance in July-September quarter earnings. Consolidated profit may fall 32.2 percent year-on-year to Rs 851 crore from Rs 1,254 crore, according to analysts polled by CNBC-TV18. Earnings will be announced on November 5. Degrowth in bottomline is because of high base in year-ago period. In Q2FY15, profit included income on sale of non-current assets amounting to Rs 1,146 crore (sale of a land at Borivali, Mumbai). Consolidated revenue is seen down 17.3 percent to Rs 29,600 crore in quarter ended September 2015 compared to Rs 35,777 crore in year-ago period. Operating profit may decline 32.3 percent year-on-year to Rs 2,465 crore and margin may contract 190 basis points to 8.3 percent during the quarter. Analysts feel two big factors that could support earnings during the quarter - one may be reversal of excess district mineral foundation provision (which could be Rs 350 crore) and second may be exceptional gain for its stake sale in Tata Motors. In September, Tata Steel sold 3,78,78,787 ordinary Shares of Tata Motors to Tata Sons (through off-market transaction) at a price of Rs 330 per share, aggregating to Rs 1249.99 crore. Domestic deliveries during the quarter may increase 11 percent on yearly basis to 2.33 million tonne (MT) in quarter gone by but EBITDA per tonne is likely to decline 40 percent year-on-year due to decline in steel realisations. Naomundi iron ore mines, which meet 30 percent of total ore requirements, closed for majority of Q2 that may have an impact on earnings. Europe sales volume is expected to come in flat at 3.4 million tonne and EBITDA per tonne may fall 40 percent year-on-year to USD 25 during the quarter. Lower European steel prices, decline in international iron ore prices & coking coal costs and cross-currency movements are expected to impact UK operations, though lower raw material cost may protect spreads to some extent. South East Asian operations may continue to remain under pressure. Sales volume is likely to decline. On standalone basis, profit may fall 6.7 percent year-on-year to Rs 2,310 crore against Rs 2,476 crore (which included income from sale of a land at Borivali). Revenue is seen falling 18.6 percent to Rs 8,780 crore from Rs 10,785 crore in same period. Operating profit may tank 46.5 percent to Rs 1,655 crore and margin may contract 990 basis points to 18.8 percent compared to year-ago period. Key factors to watch out for would be weak global steel prices & weak demand and higher steel imports (that may hurt operations).
Source: Moneycontrol.com