Tata Steel’s Indian operations recorded robust underlying performance on the back of the ramp-up of its 2.9Mt/y expansion, despite weak markets.

Deliveries totalled 7.48Mt in the financial year 2012-13 (FY’13) compared to 6.63Mt in FY 2011-12 (FY’12), an increase of 12.8%.

Turnover for FY’13 was INR381990M (US$7.053bn) compared to INR339330M ($6.265bn) in FY’12, a 12.6% increase year-on-year.

EBITDA for FY’13 was INR116980M ($2.160bn) compared to INR115590M ($2.134bn) in FY’12. Profit before tax of INR78370M ($1.447bn) in FY’13 compared to INR98570M ($1.820bn), down 20.5% in FY’12.

Profit before tax before exceptional items, was down 8.9% at INR85110M ($1.571bn) for FY’13, compared to INR93460M ($1.725bn) of FY’12.

European operations

The European operations recorded an improvement in underlying performance on the back of increase in volumes in the quarter ended March 31, 2013.

Deliveries totalled 13.07Mt in FY’13 compared to 14.02Mt in FY’12, a drop of 6.8% largely on account of repairs and outages at the operations. However, with the relighting of the Blast Furnace at Port Talbot in February, there was an increase in production and deliveries in Q4 FY’13 increased to 3.42Mt compared to 3.02Mt in Q3 FY’13 and 3.55Mt in Q4 FY’12.

Turnover in Europe amounted to INR780120M ($14.404bn) and the EBITDA was INR7640M ($141.06M) compared to the turnover of INR821530M ($15.168bn) and EBITDA of INR17770M ($328.1M) in FY’12. However, the FY’12 EBITDA included one-time gains of INR13800M ($254.8M), excluding which the underlying EBITDA for FY12 works out to INR3970M ($73.30M). In effect, the underlying EBITDA for FY13 has increased by just INR3260M ($60.19M) over the underlying EBITDA for FY12.

SE Asia

The South East Asian operations’ restructured in Australia and China to turnaround its performance.

Deliveries totalled 3.11Mt in FY’13 compared to 2.95Mt in FY’12.

Turnover in FY’13 was INR138290 ($2.553.3bn) and EBITDA was INR4830M ($89.18M) compared to the turnover of INR127100M ($2.346.7bn) and EBITDA of INR2130M ($39.32M) in FY’12, an increase of INR11190M ($206.6M) and INR2700M ($49.85M) respectively.

Global group

Groups steel deliveries in FY’13 reached 24.13Mt compared to 24.22Mt in FY’12.

Group consolidated turnover was INR1347120M ($24.872.9M) in FY’13 compared to INR1329000M ($24.538.4M) in FY’12.

Group EBITDA in FY’13 was down 6.5% at INR126540M ($2.336.4bn) compared to INR135330M ($2.498.7bn) in FY’12.

Group profit before tax and exceptional items for FY13 was down 37.6% at INR32570M ($601.37M) compared to INR52230M ($964.36M) of FY12.

The Group also sold part of its stake in Titan Industries Ltd to realise profits of INR9620M ($177.62M) in FY’13.

Group profit after tax (after minority interest and share of profit of associates) for FY’13 was a loss of INR-70580M ($-1.303bn) compared to the profit of INR53900M ($995.2M in the previous year (FY’12), this was primarily due to the non-cash impairment charge of INR83560M ($1.542.8bn) as detailed below.

Outlook

The Eurozone crisis has pushed regional economies in Europe and UK into a recession and the current steel demand is almost 30% lower than the pre-2008 financial crisis level. These severely depressed conditions are expected to continue over the short-to-medium term and have led to a downward revision of cash flow expectations and the valuation of the Groups’ European operations. Reflecting these conditions, the Group took an impairment charge of INR83560M ($1.542.8bn) in Q4 FY’13. This is a non-cash charge and does not affect any of its financial covenants and its funding position. A significant portion of this impairment charge relates partly to the goodwill created on the acquisition of Corus Group plc in 2007 and partly to the assets of the business units that have been adversely affected by the severe contraction in demand, especially in the construction sector. The balance impairment relates to the assets in Tata Steel KZN in South Africa, Tata Steel Thailand and Tata Metaliks for the Redi Plant.

Expansions

Tata Steel Group has undertaken a series of initiatives to expand its business and deliver value to all its stakeholders.
In India, the Group successfully implemented its 3Mt/y brownfield expansion at Jamshedpur which increased total capacity there to 10Mt/y. Full ramp up of the capacity was achieved in March 2013. An incremental 1Mt of steel was produced during the year, taking the total production to 7.94Mt . The Group is now embarking on its next phase of growth and is setting up a 6Mt/y greenfield steel project in Odisha state (Orissa). A new subsidiary, Tata Steel Odisha Ltd., has been set up specifically for this project which will be implemented in two phases of 3Mt/y capacity each.

In Europe, the Group has invested over £1bn ($1.5bn) in the past three years towards improving the structural competitiveness of the business including £220M ($328M) in rebuilding blast furnace No. 4 at Port Talbot, which was the largest industrial engineering project in the UK in the recent past. It continues to implement a series of initiatives to enhance competitiveness by cutting costs, increasing operational efficiency, improving product mix, and restructuring its asset portfolio. Tata Steel is also investing in developing and training people at the Tata Steel Academy and has taken on board around 500 apprentices in the UK in the past two years, of which 122 were taken on during the year. The Company is working closely with the UK government on a number of key issues to improve the competitiveness of the manufacturing industry in the UK.

The Group has decided that it will not proceed with its greenfield steel project in Vietnam in the near future.