Tata Steel profit boosts war chest for asset buys
Tata Steel Ltd said third-quarter earnings jumped more than fivefold, replenishing the company’s coffers as it plans to double production capacity in India and bid for ailing mills under a government-ordered programme.
The Mumbai-based steelmaker’s profit rose to Rs1,290 crore for the three months through December, from Rs243 crore a year earlier, according to a statement on Friday. That compares with the average of Rs1,288 crore from analyst estimates compiled by Bloomberg. Revenue climbed 15% to Rs33,450 crore.
The unit of Tata Sons Ltd is doubling down on India after selling some unprofitable businesses in Europe and agreeing to tie up with Thyssenkrupp AG for the rest of the operations. The shift in focus has come at a time when the South Asian nation is spending trillions of rupees to build up infrastructure, boosting prospects of steel makers. Tata Steel also plans to raise as much as $2 billion (around Rs12,880 crore) in a rights issue that would allow it to snap up assets being sold under the country’s insolvency resolution process.
Global steel mills are enjoying bumper profits after a government crackdown on bloated capacity in China cut exports from the world’s biggest supplier and pushed up prices. ArcelorMittal, the world’s largest steel maker, chalked up its highest annual profits since 2011, while Posco saw its income jump 60%, and India’s top producer JSW Steel Ltd reported record quarterly earnings.
“Globally steel prices have been buoyant with improved trade position in China along with cost push from raw materials,” Tata Steel chief executive and managing director T.V. Narendran said in a separate statement. “Our focus on India continues as we look to expand our Kalinganagar site as well as pursue inorganic growth opportunities.”
The company will look to “opportunistically” raise capital and improve its financial capability, said chief financial officer Koushik Chatterjee. Tata Steel’s liquidity position remains robust with Rs22,544 crore in cash and equivalents and undrawn bank lines, he said.
Among Indian producers, both JSW Steel and Tata Steel shares have soared more than 50% in the past year, while Steel Authority of India Ltd is up almost 40% on optimism over demand generated by the government’s infrastructure building programme.
Tata Steel’s Kalinganagar plant, which has a capacity to produce three million tonnes a year, shut its blast furnace for unplanned major repairs following a sudden failure in the auxiliary equipment, the company said in the statement.
The firm expects to restart the furnace in the next 7-10 days and is ensuring that it meets customer commitments from existing inventories and the Jamshedpur plant, it said. Bloomberg