Metals major Tata Steel Ltd reported 51 percent jump in consolidated net profit at Rs 960 crore for the quarter ended June 30, 2024. It reported consolidated net profit of Rs 634 crore in the year-ago period. The steelmaker's net profit missed analysts' expectations of Rs 1,025 crore, according to a poll by Moneycontrol, collated from estimates by ten brokerage houses. The net profit was also higher on a sequential basis, with the bottomline coming in at Rs 611.48 crore in the quarter ending March 31.
The firm's revenue from operations declined 8 percent to Rs 54,771 crore in Q1FY25 as against Rs 59,490 crore in Q1FY24, with the topline also being lower over the Rs 58,687 crore reported in the Jan-Mar quarter. The consolidated earnings before interest, taxes, depreciation, and amortisation, or EBITDA, for the quarter was Rs 6,822 crore, higher by 11.4 percent on an annual basis, and also higher than the Rs 6,631 crore reported in Q4 FY24.
The consolidated operating EBITDA margin for the quarter was around 12.5 percent, higher than the 10.3 percent reported in the same quarter last year, and the 11.3 percent reported in the Jan-Mar quarter, aided by a decline in the total expenses, at Rs 52,389 crore, lower than the Rs 58,553 crore for Q1 FY24, and Rs 56,497 crore in the preceding quarter. Raw material prices, including that of coking coal and iron ore, remained rangebound during the quarter, Tata Steel said in its investor presentation.
Net debt at the end of the June quarter was Rs 82,162 crore., with the company's liquidity at Rs 36,460 crore.
ELECTIONS, HEAT MAR INDIA OPS
In its India business, Tata Steel reported sluggish sales for the Apr-Jun quarter, which was marked by the General Elections, causing a slowdown in construction activity, as well as extreme heat in many parts of India, resulting in unavailability of labour and restrictions on construction. The company reported deliveries in India of 4.94 MT during the quarter, slightly higher over the same period last year, but declined 8.6 percent sequentially.
Price growth, or the lack of it, in the company's India operations remained a drag on Tata Steel's balance sheet, as it has with other steelmakers too. Market sources indicate that prices of hot rolled coil steel have declined by around 5-6 percent on an annual basis, and have been largely flat sequentially. This resulted in Tata Steel's India operations reporting an EBITDA per tonne of Rs 14,227, lower than Rs 15,884 reported in the same quarter last year, and also representing a decline over Jan-Mar, when the same was Rs 15,282.
The company noted that while imports "witnessed moderation" on a sequential basis, India remained a net importer of steel for the Apr-Jun quarter. Steelmakers, such as JSW Steel and others, have expressed concerns about the elevated levels of Chinese steel exports to India, which is also being routed through countries in the Association of South East Asian Nations, or ASEAN, trade bloc. India has a free trade agreement with ASEAN.
NETHERLANDS RECOVERING, CHURN IN UK
For Tata Steel's long-struggling European operations, the reporting quarter was marked by a recovery in the company's mainland Europe business, primarily in The Netherlands, where a newly-refurbished blast furnace at its IJmuiden works has been up and running.
Despite subdued demand in Europe, an improvement in cost metrics caused Tata Steel Netherlands to report a positive EBITDA of Rs 453 crore, translating to an EBITDA per tonne of Rs 3,075. In the quarter before and in the year-ago period, Tata Steel reported negative EBITDA from its Netherlands operations.
For the company's UK operations, EBITDA remained in the red at Rs 955 crore, representing an EBITDA per tonne loss of Rs 14,076, significantly higher YoY and sequentially. The company also built up inventory to service its downstream operations, which impacted working capital, according to Koushik Chatterjee, Tata Steel executive director and chief financial officer.
In Tata Steel UK, the company started its restructuring process to close its blast furnaces at Port Talbot and replace them with electric arc furnaces, even as parts of plan remain uncertain, particularly the 500 million pound support package that was to be provided by the UK government to the total 1.25 billion pound restructuring.
The new UK government, led by the Labour Party prime minister Keir Starmer, has been critical of the layoffs that are expected as a result of the restructuring, and wants jobs to be protected before it starts disbursing the 500 million pounds. Around 2,800 people are expected to be laid off as part of the restructuring, with Tata Steel having commenced the process of closing its heavy-end assets, including one of the two blast furnaces. The other blast furnace is scheduled for closure in September.
The company had previously indicated that the change in government would not get in the way of its restructuring plans in the UK. In the press release, ED and CFO Chatterjee said that it is continuing to engage with employees' unions in the UK, having opened the voluntary redundancy programme for employees on July 10, and it is also working with the UK government for the release of the 500 million pound grant.
CAPEX AND EXPANSION
Tata Steel spent Rs 3,777 crore by way of capital expenditure in Q1, with the 5 MTPA Kalinganagar expansion project being close to reallisation, according to the company.
The firm's 3 MTPA facility in Kalinganagar is currently being expanded in capacity to 8 MTPA, with Tata Steel managing director and chief executive officer TV Narendran saying in a press release that the new blast facility there is expected to be commissioned by September 2024.
The steelmaker announced that it is investing Rs 6,000 crore into its subsidiary Neelachal Ispat Nigam, which has a 1.1 MTPA integrated steel facility in Kalinganagar, Odisha. Tata Steel had previously said that it wants to proceed with a capacity expansion at Neelachal Ispat Nigam.
On July 31, Tata Steel's shares on NSE closed trading 0.8 percent higher at Rs 165.44 apiece.
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