Tata Steel: Margins may face pressure

Mumbai : Margin outperformance in the June quarter has been due to the lagged impact of raw material pressure. Among the world’s top seven steel makers, it has a consolidated annual capacity of 25.6 million tonnes. Given that the company has a global footprint, demand factors in both India and Europe impact profits. The Indian operations are largely integrated, as the company owns 100 per cent of its domestic iron ore requirement and 60 per cent of its coking coal requirement. This helped the company maintain margins in the current quarter.

So, the Street is rather surprised with higher-than-expected numbers of Tata Steel. The major reason for this is the performance of Tata Steel Europe. Tata Steel’s consolidated Ebitda came in at Rs 4,400 crore, compared to the consensus estimates of Rs 3,800 crore. The company’s Indian operations posted Ebitda per tonne of $440 (up 10 per cent sequentially), while European operations came in at $78 a tonne (a 48 per cent sequential growth). While sales were mostly in line with the Street’s estimates at 3.5 million tonnes, adjusted margins were much ahead of expectation at $78 a tonne.