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Street sees Tata Steel profits doubling in FY14

This article was posted on Jan 11, 2013 and is filed under Stock News

Higher volumes, led by recent expansion, cost rationalisation and better realisations from domestic operations, to aid revival
With metal prices low and demand sluggish, talk of a revival in the fortunes of a steel behemoth such as Tata Steel may seem far-fetched. However, the Street believes the fortunes of the company are set to change, even as its European subsidiary, Tata Steel Europe, continues to struggle.

Tata Steel’s total steel volume is expected to fall to 23.4 million tonnes (mt) in FY13, against 24.5 mt in FY11. However, thanks to domestic capacity expansion, the loss in volumes for its European operations, would be compensated and the overall volumes would rise to 25.5 mt in FY14. Higher volumes and the recent rise in steel prices could be key drivers.

Indian operations to the rescue
In terms of profitability, Tata Steel’s domestic business is expected to come to its rescue, despite the fact that Tata Steel Europe accounts for 60 per cent of the company’s sales. At the end of FY13, consolidated net profit is expected to fall to Rs 2,000-2,500 crore, compared with Rs 8,900 crore in 2010-11, primarily owing to a fall in volumes in Europe. According to estimates, volumes between FY11 and FY13 are likely to drop from 14.9 mt to 13.3 mt. Lower prices of steel and realisations in Europe would also contribute to the fall in profitability.

source: Business-Standard continue reading

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