Tata Steel likely to turn black in Q2 with profit at Rs 1,200 cr, volumes may boost topline

Tata Steel is expected to turn profitable in quarter ended September 2017, if the company does not account exceptional charge of 550 million pound related to British Steel Pension Scheme for separation from Tata Steel UK.

Net profit is likely to be at Rs 1,200 crore in September quarter against net loss of Rs 49 crore in year-ago quarter.

If it accounts that exceptional charge then the company could report a net loss for the quarter.

Revenue from operations during the quarter is seen rising 18.3 percent year-on-year to Rs 32,510 crore led by surge in volumes, according to average of estimates of analysts polled by CNBC-TV18.

Total volumes may grow 15.7 percent to 6.4 million tonnes.

Operating profit is expected to increase 75 percent year-on-year to Rs 5,200 crore and margin may expand 520 basis points to 16 percent in July-September quarter.

India Business (domestic operations) may look good YoY:
-Sales volumes may grow 19 percent at 3.13 million tonne versus 2.62 million tonne YoY due to ramp-up at Kalinganagar plant

-EBIDTA per tonne is expected to be growing 64 percent YoY and 18 percent QoQ at Rs 12,500 per tonne.

EBITDA/tonne may increase due to
-Benefit from volume ramp up at Kalinganagar plant
-Higher flat steel realisations & ferrochrome prices
-Better operating leverage

-Focus on value added products (automotive, branded products, value added)

Coking coal costs spiked but Tata Steel is relatively insulated against peers. It gets 40 percent of its requirement from captive sources.

Tata Steel Europe
-Sales volumes may increase 15 percent YoY and 8 percent QoQ at 2.6 million tonne
-European operations are expected to post yet another good quarter
-EBITDA per tonne is expected to cool off QoQ by 8 percent at USD 73 per tonne but may increase 7 percent YoY.

-Price hikes taken could offset bulk of the cost escalation

EBITDA per tonne of the European operations is likely to decline on a sequential due to
-Lag impact of higher coking coal prices and iron ore price

-Lower spreads

South East Asia
-Sales volumes may increase 12 percent QoQ and 3 percent YoY at 0.67 million tonne-Higher Chinese prices may help boost SEA operations' profitability