Tata Steel Ltd on July 25 declared a consolidated profit after tax (PAT) of Rs 7,765 crore for the quarter ended June 2022. The PAT was lower by 12.8 percent compared to a profit of Rs 8,907 crore recorded during the same quarter last year.
On a sequential basis, the PAT witnessed a decline of 20.4 percent from Rs 9,756 crore achieved during the January – March quarter.
The consolidated revenues for the Tata Group company during the reported quarter, rose 18.6 percent to Rs 63,430 crore compared to the revenue of Rs 53,465 crore recorded during the year ago period. On a sequential basis, the consolidated revenues have declined 8.5 percent from Rs 69,324 crore during the previous quarter.
The performance for the quarter was impacted by the higher pet coke prices which resulted in an increase in operating costs, while the export duty imposed by the Government of India, choked up the exports which had a negative impact on the volumes.
“This has been a challenging quarter for the Global and Indian economy with rising interest rates, supply chain constraints and slowdown in China due to COVID, but despite these multiple headwinds, Tata Steel has delivered a strong performance with an improvement in margins”, said T V Narendran, Chief Executive Officer & Managing Director while commenting on the performance for the quarter.
“Our strong marketing franchise and superior business model in India enabled us to successfully pivot and increase our domestic deliveries to counter the 15 percent duty imposed on steel exports in the middle of the quarter and we continue to drive value accretive growth in India backed by investments in customer relationships, brands and distribution networks and remain well positioned to benefit from the buoyant automotive & retail housing demand and the government spend on infrastructure”, he added.
The company’s European business delivered a sharp improvement in performance as long term contracts and product mix helped drive a strong increase in realizations.
Volumes
The company produced 7.74 MT (million tons) of steel during the quarter on a consolidated basis which was 1.8 percent lower as compared to 7.88 MT produced during the same period last year but was 1.6 percent higher on a sequential basis.
The consolidated sales volume during the quarter were impacted by the imposition of exports duty and other macro factors. The sales volume during the quarter came in at 6.62 MT which was 7 percent lower on year and 17.4 percent lower on a sequential basis.
Revenue per ton for India operations rose by Rs. 8,534 QoQ to Rs. 83,625 per ton while Revenue per ton for its European operations increased by £154 QoQ to £1,248 per ton aided by long term contracts and product mix.
Margins
The consolidated EBITDA (earnings before interest, tax, depreciation and amortization) for the quarter stood at Rs 15,047 crores which was flat on a sequential basis but dipped 7 percent as compared to the same period a year ago.
On QoQ basis, EBITDA margin improved to 24 percent while EBITDA per ton increased by Rs 3,780 to Rs 22,717. While comparing with the same period last year, the EBITDA per ton remained flat.
The EBITDA of India operations stood at Rs 9,582 crores, resulting in an EBITDA per ton of Rs 23,557 while the European operations achieved highest ever quarterly EBITDA at £621 million, which resulted in an EBITDA per ton of £290.
Business Updates
Tata Steel’s subsidiary, Tata Steel Long Products, completed the strategic acquisition of Neelachal Ispat Nigam Limited on July 4 and the company expects this acquisition will drive growth of its long products business.
“We are geared towards commissioning the 6 MTPA pellet plant at Kalinganagar in Q3FY23 which will drive cost savings followed by the CRM complex and the 5 MTPA expansion project”, added Narendran. The company spent Rs 2,725 crores on capital expenditure in line with its annual capex guidance on its Kalinganagar expansion.
The company’s 10:1 stock split has received the necessary approvals and July 29 has been set as the record date to give effect to the split.
Debt
The Net debt at the end of the quarter stood at Rs 54,504 crores with Net debt to EBITDA <1.0X. “We remain committed to our annual deleveraging target of $1 billion in line with our capital allocation strategy to reduce our debt”, said Koushik Chatterjee, Executive Director and Chief Financial Officer.
Outlook
“We expect that volatility in terms of steel price and input cost movement to continue in the next quarter but expect the spreads to stabilise in the second half of the year”, added Chatterjee. “The volatility in commodity prices and immediate impact of the export duty in India have led to an increase in working capital but our cost improvement and other initiatives along with expected pickup in demand in the second half of the year should result in normalisation of working capital”.
Shares of Tata Steel closed Rs 11.45 lower at Rs 1,017.25 on July 25 on the NSE. The stock has declined 26 percent over the past one year but has gained 11.5 percent over the past one month.
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