Tata Steel Net Beats Estimates as European Demand Recovers

Tata Steel Ltd., India’s biggest producer of the alloy, reported a profit in its fourth quarter as demand recovered in Europe, its biggest market.

Net income, including that of Tata Steel Europe Ltd., was 10.4 billion rupees ($175 million), or 10.2 rupees a share, in the three months ended March 31, compared with a 65.3 billion rupee loss, or 67.69 rupees, a year ago, the Mumbai-based company said yesterday in a statement. The median profit of 23 analyst estimates compiled by Bloomberg was 9.13 billion rupees. Sales rose 23 percent to 420.2 billion rupees.

Tata Steel benefited from an upturn in demand in Europe and a focus on selling high-value products. ArcelorMittal, the world’s biggest steelmaker, said last week European demand is growing faster than it expected. India’s vehicular demand may gain as much as 4 percent this year and the country’s alloy consumption may climb 5 percent, Tata Steel Vice President Peeyush Gupta said last week.

“Tata Steel remains our preferred pick in the steel sector given its superior margin profile, rising share of the Indian business in the overall mix,” Mumbai-based brokerage Ambit Capital Pvt. said in a report yesterday.

Demand and pricing outlook in India and Europe and timely commissioning of the company’s Odisha project in the eastern Indian state would be key to Tata Steel’s performance, according to the Ambit report.

Dividend, Shares

Tata Steel will pay a dividend of 10 rupees a share. The shares rose as much as 2.6 percent to 463.95 rupees and traded at 456.50 rupees as of 9:39 a.m. in Mumbai. The stock has risen 7.8 percent this year, compared with a 13 percent gain in the benchmark S&P BSE Sensex.

Group steel deliveries rose 16 percent in the quarter to 7.62 million tons. Registrations for new cars in the European Union surged 5.4 percent in the last quarter, the longest streak of year-on-year gains since 2009, according to Bloomberg Industries.

In India, Tata Steel gained market share after it sold 5.6 percent more alloy in the last quarter, while nationwide demand grew by less than 1 percent. The company was able to maintain prices in the local market where sectors including automobiles and construction are facing a slump.

Debt, Cash

Earnings before interest, tax, depreciation and amortization per ton for the group rose 18 percent to 6,166 rupees a ton. Net debt was 673.3 billion rupees, while cash and equivalents were 113.7 billion rupees as of March 31.

Total costs rose 23 percent to 389 billion rupees in the quarter, while raw material expenses rose 44 percent to 126 billion rupees from a year ago, according to the statement. A European slowdown in the year ended March 31, 2013, had led Tata Steel to write down assets by $1.35 billion.

Rival AcelorMittal reported a higher-than-expected 12 percent increase in earnings before interest, tax, depreciation and amortization in the first quarter. The steelmaker maintained its full-year earnings target, as demand rebounds in Europe and the U.S., its biggest markets.