Tata Steel Group today declared unaudited Consolidated Financial Results for the quarter ended June 30, 2009.

Highlights for the quarter:

• Sales volume of Indian operations was higher by 22% during Q1 FY’10 over Q1FY’09. Total steel deliveries for the Group for the quarter dropped 37% to 5.443 million tonnes from 8.603 million tonnes in Q1 FY’09 mainly due to fall in volume in Tata Steel Europe (TSE) affected by the demand contraction especially in Europe on account of the global economic downturn.

• Group consolidated turnover was Rs.23,292 crores (US$ 4,863 million) as compared to Rs. 43,496 crores (US$ 9,081mn) registered during the first quarter of 2008-09 (Q1 FY’09) caused primarily by the drop in sales volume in TSE as well as drop in prices in India and South-East Asia.

• The cost savings benefits achieved in the first quarter from the ‘Weathering the Storm’ and ‘Fit for the Future’ programs was around Rs. 2,200 crores (US$ 460 mn).

• EBITDA during Q1 FY’10 was Rs. 204 crores (US$ 43 million) against Rs. 7,375 crores (US$ 1,540 mn) in Q1 FY’09. The drop in EBITDA was attributable mainly to the challenging economic environment caused by the global recession especially in UK & Europe.

• Consequently, Loss after tax (after minority interest and share of profit of associates) was Rs. 2,209 crores (US$ 461mn) as compared to a profit of Rs.3,901 crores (US$ 814 mn) in Q1 FY’09.

• In July 2009, the Company has issued 65,410,589 Global Depository Receipts (“GDRs”) worth US$ 500 million each GDR representing one ordinary share.

• The Group continues to have robust liquidity position (including undrawn credit lines) of over Rs. 16,750 crores (US $ 3,500 mn) as on date on account of external capital raising and tight working capital management across all geographies. The net debt for the Group as at end June 2009 was Rs. 49,170 crores (US$ 10,265 mn).

Executive Comments from the Management:

Tata Steel Managing Director, Mr B. Muthuraman, said: “The results of Tata Steel Group for the quarter ended June reflects the impact of the global economic downturn, particularly in the developed markets. The Group is currently undertaking several restructuring initiatives internally to not only weather the current storm but to emerge much stronger in the near future. The global recovery is expected to be slow and the company will continue to focus on operating performance and liquidity management. Overall, the Tata Steel Group is in a relatively good position because of our wide geographic reach and our strong position in the growing Indian market.”

Tata Steel Europe, CEO Kirby Adams said: “We anticipated that the first two quarters of the current year would be a difficult one for European steelmakers, which is why we started taking action early this calendar year to align our output and costs to the lower demand levels in Europe. The unexpected termination of the Teeside off-take agreement in April 2009 by the four off-takers cost Tata Steel Europe Rs.244 crores (US$ 51 mn) in EBIT and Rs. 742 crores (US$ 155 mn) in operating cash flows during the first quarter. Despite the reported losses, Tata Steel Europe has generated substantial operating cash flows in the quarter through tight working capital and spend management. We will continue to do what is required to ensure that the financial performance of Tata Steel Europe recovers to positive territory in the second half."

Tata Steel Executive Director (India & South-East Asia), Mr. Hemant Nerurkar, said: “The performance of the Indian operations of Tata Steel Group continues to demonstrate its preeminent competitive position in the global steel industry as demonstrated in its financial performance for the quarter. The company is currently focused on increasing its market share through enhanced volume in the forthcoming quarters leveraging its newly expanded capacity. The Jamshedpur 10 million tonnes expansion program continues to be the top priority of the company and is progressing on schedule. We also hope that we are able to begin the work at our Orissa Project site soon. The South-East Asian business of Tata Steel including NatSteel and Tata Steel Thailand has initiated several cost saving measures to offset the current downturn and is expected to increase its volumes and profitability in the near future.”

Financial performance (under Indian GAAP) for the quarter ended June 2009:

For the purposes of this note the Indian rupee has been converted to US$ at Rs.47.90 per US$.

Notes:

1. The actuarial gains and losses on funds for employee benefits (pension plans) of Tata Steel Europe Limited for the period from April 1, 2008 have been accounted in “Reserves and Surplus” in the consolidated financial statements in accordance with IFRS principles and permitted by Accounting Standard 21. This treatment is consistent with the accounting principles followed by Tata Steel Europe and earlier by Corus Group plc. under IFRS. Had the company recognised changes in actuarial valuations of pension plans of Tata Steel Europe in the profit and loss account, the consolidated loss after taxes, minority interest and share of profit of associates for the quarter ended June 30, 2009 would have been higher by Rs. 2,147 crores (US$ 448 mn) (the consolidated profit after taxes, minority interest and share of profit of associates for the quarter ended June 30, 2008 would have been lower by Rs. 5,508 crores – US$ 1,150 mn).
2. The Company and its Indian subsidiaries have adopted the Companies (Accounting Standards) Amendment Rules 2009 relating to Accounting Standard AS11 during the last quarter of 2008-09. Accordingly, an exchange translation gain of Rs. 24 crores (US$ 5 mn) has been adjusted to the cost of capital assets during the current quarter and Rs. 4 crores (US$ 0.84mn) being amortization of cumulative net loss has been charged to profit & loss account. Had the Company and its Indian subsidiaries followed the previous practice of recognizing the translation gain / loss in the profit & loss account, the consolidated loss after taxes, minority interest and share of profit of associates for the quarter ended June 30, 2009 would have been lower by Rs. 292 crores (US$ 61mn).
3. The Company has changed its accounting policy for accounting of derivatives effective April 1, 2009, in the consolidated accounts. In the absence of any operative Indian Accounting Standard on the subject, changes in fair value of outstanding derivative instruments designated as cash flow hedges against firm commitments and highly probable forecast transactions which were hitherto accounted in the profit & loss account have now been accounted in “Reserves & Surplus” in accordance with IFRS principles and the proposed Accounting Standard AS30. Had the Company not changed the policy, the consolidated loss after taxes, minority interest and share of profit of associates for the quarter ended June 30, 2009 would have been higher by Rs. 852 crore (US$ 178 mn)

Tata Steel Group EBITDA:

Sales volume of Indian operations was higher by 22% during Q1 FY’10 over Q1FY’09. However sales volumes of European operations registered a sharp decline by 48%. Sales volumes of NatSteel and TSTH also registered declines and thus overall sales volume for the group were lower by 37%. While selling prices declined by a modest 1% in Europe in Q1FY’10 over Q1FY’09, lower capacity utilization combined with high raw material cost severely impacted the profitability of TSE operations. Lower realizations affected profitability of other entities and thus group posted an EBITDA of Rs. 204 crores (US$ 43 mn) in Q1FY’10 against Rs.7,375 crores (US$ 1,540 mn) in Q1FY’09.

Tata Steel India

Turnover at Tata Steel India was Rs. 5,616 crores (US$ 1,172 mn) in Q1 FY’10 as compared to Rs. 6,153 crores (US$ 1,285 mn) in Q1FY’09. EBITDA in Q1FY’10 was Rs 1,789 crores (US$ 373 mn) as against Rs.3,037 crores (US$ 634 mn) in Q1FY’09. Finished steel production at Tata Steel India for Q1FY’10 was 1.542 million tonnes as compared to 1.187 million tonnes recorded in Q1FY’09. Steel deliveries were 1.418 million tonnes in Q1FY’10 as against to 1.159 million tonnes in Q1 FY’09.

Tata Steel Europe

Turnover at Tata Steel Europe (TSE) was Rs. 15,228 crores (US$ 3,179 mn) in Q1FY’10 as compared to Rs.32,955 crores (US$ 6,880 mn) in Q1FY’09. EBITDA was a negative of Rs. 1,853 crores (US$ 387 mn) in Q1FY’10 against a profit of Rs. 3,724 crores (US$ 777 mn) in Q1 FY’09. Liquid steel production at TSE was 2.8 million tonnes in Q1FY’10 as compared to 5.2 million tonnes in Q1 FY’09. Steel deliveries were 3.3 million tonnes in Q1FY’10 as against 6.3 million tonnes in Q1 FY’09.

The ‘Weathering the Storm’ and ‘Fit for the Future’ initiatives continue to bring tangible benefits to the business in addition to the substantial savings achieved during the last financial year. During the financial year 2009-10 the company expects these initiatives to generate further benefits exceeding Rs.6,200 crores (US$ 1,300 mn) and the benefits achieved in the first quarter was around Rs. 2,200 crores (US$ 460 mn) which is as per plan.

Since the first quarter, steel demand in the region has stabilised. Crude steel production in July in the European Union was almost 25% higher than the low point in December 2008. Prices of select products are firming and destocking appears to be nearing its end, but it remains unclear how strong or long lasting this recovery will be. In order to continue to meet customer requirements the Company has restarted the No 6 blast furnace in IJmuiden and temporarily reopened the Llanwern Hot Strip Mill. TSE’s capacity utilisation (excluding Teesside Cast Products) is expected to show steady improvement in subsequent quarters.

During May 2009 the Group announced a 90-day consultation period in advance of the potential mothballing of the Teesside Cast Products (TCP) operations at TSE, following the action of the Consortium of four international slab buyers in seeking to exit an off-take agreement. As a result, this business has been limited to internal deliveries for major period of the quarter.

NatSteel

Turnover at NatSteel was Rs. 2,431 crores (US$ 507 mn) in Q1FY’10 as compared to Rs.3,456 crores (US$ 721 mn) in Q1 FY’09. EBITDA was Rs. 41 crores (US$ 9 million) in Q1FY’10 as against Rs. 209 crores (US$ 44mn) in Q1FY’09. Finished steel production at NatSteel was 0.380 million tonnes in Q1 FY’10 as compared to 0.409 million tonnes in Q1FY’09. Steel deliveries were 0.540 million tonnes in Q1FY’10 as against 0.827 million tonnes in Q1 FY’09.

Tata Steel Thailand

Turnover at Tata Steel Thailand was Rs. 637 crores (US$ 133 mn) during Q1FY’10 as compared to Rs. 1,432 crores (US$ 299 mn) in Q1 FY’09. EBITDA was Rs. 4 crores (US$ 1 million) during Q1FY’10 as against Rs. 393 crores (US$ 82 mn) in Q1FY’09. Finished steel production at Tata Steel Thailand during Q1 FY’10 was 0.261 million tonnes as compared to 0.368 million tonnes in Q1FY’09. Steel deliveries were 0.265 tonnes in Q1 FY’10 as against 0.351 million tonnes in Q1 FY’09.

Listing of Global Depositary Receipts on the London Stock Exchange:

On July 21 2009, the Company has priced an equity offering in the form of Global Depository Receipts (“GDRs”) for a gross amount of US$500 million. The Company has issued 65,410,589 GDRs, each GDR representing one ordinary share. Each GDR has been priced at US$ 7.644 as per the relevant pricing guidelines for GDRs. The equity raising exercise and the listing on the London Stock Exchange marks a significant milestone in the company's capital raising journey and demonstrates the investors’ interest in the Company's strategic direction. The GDR offering has attracted demand from very good quality investors which enabled the company to increase the offering size from US$ 400 million to US$ 500 million - being one of the largest GDR offerings by any Indian Company on the London Stock Exchange. Though the company has adequate liquidity with no material repayments in the next 12 months, the equity raising exercise will help in capitalizing the Balance Sheet and enable deployment in highly attractive projects- like the ongoing expansion of Jamshedpur in India and overseas mining projects. This deployment strategy would be value accretive to the Company's shareholders in the future.

Liquidity and Net Debt position:

Tata Steel Group continues to focus on liquidity management across its enterprise. The overall liquidity position as on date is US$ 3,638 mn represented by cash and cash equivalent of US$ 2,239 and undrawn lines of US$ 1,399 mn. The Net Debt for the Group at end June 2009 was Rs. 49,170 crores (US$ 10,265 mn) against Rs.50,354 crores (US$ 10,512 mn) as at end March 2009. During the quarter, the company repaid Rs.3,891 crores (US$ 812 mn) of debt and prepaid additional Rs. 790 crores (US$ 165 mn) in early July to the banking syndicate of Tata Steel Europe.

Disclaimer

Statements in this press release describing the Company’s performance may be “forward looking statements” within the meaning of applicable securities laws and regulations. Actual results could differ materially from those expressed or implied. Important factors that could make a difference to the Company’s operations include, among others, economic conditions affecting demand / supply and price conditions in the domestic and overseas markets in which the Company operates, changes in Government regulations, tax laws and other statutes and incidental factors.