Pressure in Europe ops may dent Tata Steel's Q1 net: Poll

Tata Steel, India’s largest steel maker is likely to report around 50 percent year-on-year decline in its June quarter profit to Rs 300 crore on huge forex loss, states CNBC-TV18 poll. The firm will announce numbers later in the day and analysts expect net sales to also drop around 3 percent to Rs 32606 crore. However, EBITDA margins will improve slightly to 9.6 percent on improved volumes at Tata Steel India.

While Tata Steel Europe (TSE) continues to remain under pressure, Tata Steel India (TSI) will put up a good show in comparison. Read This: Tata Steel Q1: Prabhudas Lilladher expects loss of Rs 1.4cr These factors will boost TSI’s financial performance during the quarter.
-Topline will be supported due to higher sales volume
-Sales volume could be at 2.01 million tonne, up 26 percent Y-o-Y.
-Capacity utilization is rising at Jamshedpur owing to the ramp up from the newly commissioned 2.9 MT expansion
-Realization is expected to decline 12 percent Y-o-Y
EBITDA to decrease to USD250/ton (around 8 percent sequentially) on account of:
-Higher coking coal costs in rupee terms TSE operations will be under pressure on account of
-Lower steel price but lag effect of March price will offer some support
-EBITDA/tn lower on account of higher iron ore cost and lower scale
-Input costs to increase sequentially.
-Steel prices in Europe have declined 6-7 percent sequentially. High debt a concern
-Net debt at the end of 4QFY13 was Rs 554 billion, up from Rs 476 billion in March 2012
-Net debt to equity stood at 1.3x at the end of F13
-Net debt to increase to Rs 633 billion and Rs 668 billion in FY2014 and FY2015 due to Odisha capex
-Reports indicate (partial) sale of European assets
-Depressed valuations in the European region could provide some relief