Tata Steel (TATASTEEL) Q4 97/98 earnings summary

Executive summary

• FY1997-98 sales of products and services rose 1.3% to Rs. 6,433.49 crore, but operating profit fell to Rs. 995.34 crore and net profit to Rs. 322.08 crore amid price pressure and weak demand.

• Domestic steel sales volume grew 9.74% to 2.388 million tonnes, lifting market share despite a 1% decline in domestic steel demand.

Financial highlights

• Gross revenue reached Rs. 6,516.58 crore versus Rs. 6,409.43 crore; profit before tax was Rs. 363.33 crore versus Rs. 542.21 crore.

• Net profit was Rs. 322.08 crore versus Rs. 469.21 crore, after Rs. 112.19 crore employee separation compensation and Rs. 41.25 crore tax provision, including MAT.

• Operating profit declined to Rs. 995.34 crore from Rs. 1,164.13 crore; intense competition, lower net realizations and higher input costs pressured margins.

• Capital expenditure was Rs. 1,119.44 crore; cash generated from operations was Rs. 494.06 crore, while closing cash and bank balances were Rs. 429.41 crore.

Outlook and guidance

• Hot Strip Mill expansion was targeted for completion by mid-1998, increasing hot-rolled coil capacity to 2.08 million tonnes annually; FY1998-99 production was expected at 1.6 million tonnes.

• Cold Rolling Mill construction was targeted for commissioning in June 2000, on a 24-month schedule; the project was intended to expand value-added output.

• Management cited continued weak demand and uncertain infrastructure spending for the current year, with potential additional financing constraints following regional nuclear tests.

• Cost reduction, value-added products, improved product mix and reduced semi-finished output were strategic priorities; operating improvements included lower energy use and higher manpower productivity.