Tata Steel (TATASTEEL) Q4 07/08 earnings summary

Executive summary

• Consolidated capacity reached 28.1mtpa after the Corus acquisition; the combined operations ranked sixth globally, with 32mt of steel deliveries reported.

• Consolidated net sales were Rs 131,536cr and profit after minority interest and associates was Rs 12,350cr; prior-year comparisons exclude Corus and are not like-for-like.

• Corus was consolidated from 2 April 2007; integration delivered USD 76m of synergies in FY08 against a USD 450m target by Q4 FY10.

Financial highlights

• Consolidated net turnover was Rs 132,110cr versus Rs 25,650cr; consolidated PAT was Rs 12,350cr versus Rs 4,177cr, with Corus included for the first time.

• Consolidated PBT was Rs 16,371cr, including exceptional gains of Rs 6,124cr: Rs 5,907cr actuarial gain, Rs 595cr forex gain, offset by Rs 227cr separation costs and Rs 150cr sports-infrastructure charge.

• Standalone net sales rose 12% to Rs 19,693cr; PAT rose to Rs 4,687cr from Rs 4,222cr and basic EPS was Rs 67.17 versus Rs 65.28.

• Consolidated basic/diluted EPS was Rs 177.18/Rs 162.96; the recommended ordinary dividend was Rs 16 per share, or 160%, plus 2% on CCPS.

• India operations reported record-low specific energy use of 6.655 GCal/tcs and standalone net sales growth was driven mainly by higher domestic prices.

Outlook and guidance

• Target ROIC on existing assets is 30% from 19% over five years; the strategy combines asset optimisation, product differentiation, continuous improvement and Corus synergies.

• Jamshedpur expansion targets 10mtpa by 2011; the first phase to 6.8mtpa was nearing completion and the second 3mtpa phase was progressing to schedule.

• Kalinganagar is planned as a 6mtpa greenfield plant in two phases; progress included land acquisition, rehabilitation and equipment orders.

• Long-term raw-material ambitions are 100% self-sufficiency in India and ~50% in Europe; resource projects include coal in Mozambique, iron ore in Ivory Coast and limestone in Oman.

• Synergies of USD 450m are targeted by Q4 FY10; USD 76m had been realised in FY08, while Corus reported close to USD 600m in internal performance improvements.