Tata Steel Sales Volume Grew By 3.3% For March Quarter 2012

Tata Steel, ahead of its Q4 result, has announced the production and sales numbers of its Indian operation. The overall sales volume of the company was better than its previous three quarters of FY12. The sales volume during the March quarter grew by 3.3 per cent on a YoY basis to 1.76 million tonnes.

For the fiscal year 2012 the sales volume for the Indian operation increased by 3.4 per cent on a YoY basis to 6.63 million tonnes. The growth in the overall sales volume is largely on account of the higher sales volume of flat products which are used for automotive purposes. The volume of flat products has gone up by 6 per cent to 3.74 million tonnes while that of long products used for infrastructure purpose has grown by 0.7 per cent to 2.897 million tonnes for the full year FY12.

We believe that the company’s Indian operations will continue to do better in the current quarter mainly because of the jump in the sales volume and the recent price hike by the company in March. However, the margin of the company will see some respite from the high coking coal cost which has come down from its high of USD 300 per tonne level to USD 220 per tonne level.

However, its major operations in Europe which contributes 60-65 per cent of the overall revenue will continue to struggle as the European region has been going through a slowdown phase and it won’t see any major recovery on the demand side in the near term. In the previous quarter, due to weak demand, it went for an inventory write-off worth Rs 741 crore and reported a net loss of Rs 687 crore.

We believe that on a consolidated basis the topline of the company for the March quarter will remain modest mainly on the back of a weak European operation. However, the Indian operation will continue to provide a boost to the company’s overall performance both in terms of the topline and bottomline of the company.