E-Paper
Tata Steel Q3 net profit at ₹4,010 crore
Reported numbers are far ahead of estimates. A Bloomberg poll of 14 analysts had forecast revenue of ₹38,982.40 crore while 15 analysts had forecast profit of ₹3227.60 crore.
A sharp bounceback in domestic sales and higher metal prices helped Tata Steel report net profit of ₹4010 crore, on consolidated revenue of ₹39,809 crore in the December quarter. The performance is a significant turnaround from the loss of ₹1228 the company reported in the same period last year.
Reported numbers are far ahead of estimates. A Bloomberg poll of 14 analysts had forecast revenue of ₹38,982.40 crore while 15 analysts had forecast profit of ₹3227.60 crore.
The company achieved its highest ever quarterly domestic Ebitda (earnings before interest, tax, depreciation and amortisation) of ₹8,811 crore, rising 2.14 times year-on-year, driven by higher prices, better product mix, lower exports and operating efficiency initiatives. Its EBITDA/tonne, a key measure of production efficiency, reached Rs.18,931 and the EBITDA margin stood at 34.9%.
Domestic crude steel production remained strong at 4.6 million tonnes, registering a 3% growth year-on-year.
On 29 January, the company announced that talks with Swedish firm SSAB steel for a potential sale of part of its European operations had fallen through. The company said that following the termination of the discussions with SSAB on Tata Steel Netherlands (TSN), the company will be focusing on performance and cash flows in the immediate term.
“Tata Steel is committed to arrive at a strategic and sustainable resolution for its European portfolio…The process to separate Tata Steel Netherlands and Tata Steel UK is currently underway,” a press release from the company said.
Tata Steel Europe reported Ebitda/tonne of $46 compared to loss of $27 in the preceding quarter, a preliminary report by Edelweiss Securities said. “This was a major negative surprise. There is a one-off component pertaining to the reversal of wage support from the Netherlands government and higher provision of carbon emission.”
It added that Tata Steel will continue to prioritise capital expenditure; it spent Rs.1,394 crore on capex during the quarter and will restart work on pellet plant and cold roll mill complex at Tata Steel Kalinganagar.
“We pivoted our deliveries to domestic markets, to cater to the requirements of our local customers by reducing exports. All the segments, especially automotive, have performed extremely well supported by our continuous focus on strong customer relationships, superior distribution network, brands and new product developments,” TV Narendran, CEO & Managing Director, Tata Steel said in the press release.
“In Europe, our underlying performance has improved quarter on quarter while the reported EBIDTA was negatively impacted by few one-offs. We remain committed to arrive at a strategic and sustainable solution for Tata Steel Europe, though in the immediate term, we will focus upon business performance and cash flows.”
“Our enterprise strategy on debt management continues to be on target” said Koushik Chatterjee, Executive Director and CFO.
“After reduction in net debt by ₹8,285 crore in the first half, which surpassed our annual de-leveraging target of $1 billion, we continued to aggressively reduce our net debt by ₹10,325 crores and gross debt by Rs.5,640 crores during the quarter, taking the nine month reduction in net debt by Rs.18,609 crores and gross debt by Rs.7,649 crores. This has significantly improved the credit metrics of the company. Our cash flow generation remains strong and in addition to the de-leveraging in the first nine months, we will further reduce the gross debt by more than ₹12,000 crores in the fourth quarter of the current financial year. We have restarted allocating capital on margin expansionary growth projects in India within the contours of the targeted financial framework.”
