Posted on 22 August 2007

 

Source: Bangkok Post, August 22, 2007

Higher prices, strong exports drive profits

Tata Steel (Thailand) Plc, the local steelmaking unit of the Indian conglomerate Tata Group, expects its revenue to grow more than 10% this year, driven by increasing product prices and higher sales volume, according to vice-president Aditya Choudhury.

Tata's Thailand operation, which was created after the company bought a 65% stake in Millennium Steel Plc from the Siam Cement Group, sold 1.05 million tonnes of construction steel last year to bring in total revenue of 18.8 billion baht.

The company expects its sales volume this year to reach 1.3 million tonnes, up 23%, with about 10% year-on-year growth in sales revenue.

For its first-quarter performance ending June 30, the company sold 633,000 tonnes worth 5.77 billion baht, a 20% increase compared to the same period of last year.

Tata Steel posted a net profit of 426.27 million baht in the quarter, up 82% from 233.18 million baht in the same period last year.

Mr Choudhury said Tata hoped to boost exports to about 10% of total sales this year from only 2-3% in the previous year, and they are on pace to hit 12% by year's end.

So far, export prices of construction steel stand at $530 a tonne, or around 18,000 baht per tonne. In Thailand they are selling at 19,500 baht a tonne.

''Due to healthier demand in the export market, we have seen not only rising sales volume, but also a surge in selling prices,'' he said.

Srithai Hemsoraj, vice-president for administration, said the company's margins would likely remain similar to last year at 12% amid higher operating and raw material costs.

The company mainly exports to neighbouring countries, North America and the Middle East.

Management planned to obtain loans of 3.5 billion baht this year for the company's mini-blast furnace worth between 3.4 billion and 3.6 billion baht. Tata has set aside a capital expenditure budget of 400 million baht annually for regular maintenance.

Mr Choudhury said Tata Steel's refinancing late last year has given the company an outstanding low debt level of 4.7 billion baht, or 0.5 times.

The furnace project, with a capacity of 500,000 tonnes per year, is aimed at reducing costs by instilling quality control for products and preparing the company for premium-grade goods.

Tata has a total production capacity of construction steel totalling 1.7 million tonnes, with 1.3-million-tonnes per year of scrap smelting.

The Indian steelmaker anticipates that steel demand in Southeast Asia would remain strong as it looks for regional investment, particularly in Vietnam, which should see high levels of economic growth for the next decade.

Tata Steel is the largest unit of the Tata Group, with a combined annual capacity of 25 million tonnes, accounting for about half of the group's total revenue. Other businesses, including automobiles, computer software, chemicals, hotels and power generation account for the rest.

Tata Steel (Thailand) shares (TSTH) closed yesterday at 1.55 baht, down 13 satang, in trade worth 36.14 million baht.

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