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| Tata Steel, Hindalco gain on subsidiaries' performance |
| Abhineet Kumar / Mumbai Feb 18, 2010, 00:24 IST |
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The stocks of India’s largest steel maker, Tata Steel, and the largest aluminium maker, Hindalco, gained on the back of better performance from their respective subsidiaries abroad, Corus and Novelis.
The shares of Tata Steel gained 6.37 per cent to Rs 584.9 a share on the Bombay Stock Exchange, while Hindalco gained 5.2 per cent to Rs 152.8 a share on the exchange. Sensex, the benchmark index of the exchange, gained 1.25 per cent to 16,428 on the day.
“Corus’ performance has been largely at the back of lower raw material cost, while Novelis has benefited from pricing power returns, with ceiling prices going away,” said Paresh Jain, research analyst at Angel Broking.
“The performance of Novelis is more sustainable, as it continues to enjoy pricing power but Corus’ performance would depend on whether it is able to pass on rising raw material prices to consumers,” he said.
Novelis, the North America-based subsidiary of Hindalco Industries, said on Tuesday late evening, that it recorded $68 million of net profit at the end of the quarter ended December 31, in comparison to a loss of $1,820 million in the corresponding period of the previous year, that had included impairment charges of $1.5 billion and $463 million of unrealised losses on derivatives.
The result for the third quarter is its best ever for this period in terms of adjusted earnings before interest, taxes, depreciation and ammortisation (Ebitda) or operating profit and free cash flow, claimed the company in a statement. Adjusted Ebitda for the third quarter was $199 million, representing a 55 per cent increase from adjusted Ebitda of $128 million recorded in the year ago period, and flat compared to the second quarter of the current financial year.
“The performance is largely a result of cost elimination, restructuring initiatives and efficiency improvements the company began in early 2009,” said Phil Martens, president and chief operating officer at Novelis.
The company had earlier announced that it would realise annualised cost savings of $140 million by the second quarter of 2010-11. It is now expecting to meet this ahead of schedule. It also expects the majority of these savings to be sustainable, going forward.
“As of January 1, 2010, we are no longer subject to metal price ceilings in any of our contracts,” said Steve Fisher, chief financial officer of Novelis. “This is a significant milestone and when combined with continued strong operating performance, will help drive stronger cash flow generation.”
Tata Steel on Tuesday late evening said it recorded net profit of Rs 432 crore on a consolidated basis, 42 per cent lower than Rs 813 crore reported a year earlier.
But, the result is the best in the past four quarters, as it turned into the black after reporting net losses in the past three quarters. In the quarter ending September 30, the company had recorded Rs 2,707 crore of net loss and it recorded Rs 2,208 crore and Rs 4,535 crore of net loss, respectively, in the quarter ending June and March.
“We sharply reversed the trend of previous quarters by returning to positive Ebitda through improved margins and lower costs,” said Kirby Adams, managing director and chief executive officer at Tata Steel Europe.
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