Other income stood at Rs 2,938.2 crore for the quarter, significantly higher compared to Rs 321.5 crore in year-ago period due to sale of shares in Tata Motors.
Tata Steel's consolidated profit grew by 21.9 percent year-on-year to Rs 1,528.7 crore in July-September quarter, driven majorly by other income but exceptional loss limited bottomline growth. Domestic operations were better than analysts' expectations but Europe operations disappointed due to sharp deterioration in market conditions (especially in UK) which reported EBITDA loss during the quarter.
Consolidated revenue declined 18 percent to Rs 29,304.7 crore during the quarter compared to Rs 35,777.1 crore during same period.
"Underlying operating performance of Tata Steel Group in Q2FY16 has been impacted by weak economic environment, relative currency movements and a surge in imports in key geographies such as the UK, India and Europe," Koushik Chatterjee, Group Executive Director (Finance and Corporate), says in its statement.
Consolidated numbers barring profit missed analysts' expectations. Profit was estimated at Rs 851 crore on revenue of Rs 29,600 crore and operating profit was expected at Rs 2,465 crore (down 32.3 percent year-on-year) with margin contraction of 190 basis points for the quarter.
Consolidated operating profit (earnings before interest, tax, depreciation and amortisation) plunged 49.8 percent year-on-year to Rs 1,830 crore and margin contracted by 400 basis points to 6.2 percent in quarter ended September 2015.
Other income stood at Rs 2,938.2 crore for the quarter (significantly higher compared to Rs 321.5 crore in year-ago period), which included gain of Rs 2,808.29 crore on sale of quoted investments.
In September, Tata Steel sold 3,78,78,787 ordinary Shares of Tata Motors to Tata Sons (through off-market transaction) at a price of Rs 330 per share, aggregating to Rs 1249.99 crore.
The company has reported an exceptional loss of Rs 563.7 crore during the quarter against exceptional gain of Rs 1,145 crore in year-ago period. Exceptional item included provisions & diminution of assets and credit on account of solution of pension row in Europe.
"During the first half of the current fiscal, Tata Steel has raised internal equity of around Rs 4,200 crore by continuing to monetise non-core assets. The company also successfully restructured the British Steel Pension Scheme and completed Triennial valuation of the scheme," Chatterjee says.
Indian operations reported strong growth in production and deliveries during the quarter despite subdued manufacturing activity in country, downturn in global commodity prices and strong imports from China & other FTA countries like Japan & Korea.
Deliveries increased by 9 percent to 2.33 million tonnes on the back of strong sales to auto sector and a higher proportion of value added products, TV Narendran, Managing Director of Tata Steel India and South East Asia says.
On standalone basis (domestic operations), profit during the quarter declined 2 percent to Rs 2,523 crore and revenue fell 11.6 percent to Rs 9,531 crore compared to corresponding quarter of last fiscal. Operating profit was down 39.8 percent to Rs 1,862 crore and margin contracted by 920 basis points to 19.5 percent in same period.
Standalone numbers were ahead of estimates. Profit was estimated at Rs 2,310 crore on revenue of Rs 8,780 crore and operating profit was expected at Rs 1,655 crore with margin at 18.8 percent for the quarter.
Other expenses on standalone basis declined 12.1 percent to Rs 2,272 crore and finance cost was down 32.2 percent to Rs 331.3 crore compared to year-ago period.
Tata Steel Europe has posted a loss of Rs 238 crore at EBITDA level (against EBITDA gain of Rs 929 crore year-on-year) as sharp deterioration in market conditions affected performance in the UK. Turnover during the quarter was at Rs 16,948 crore, down 16.1 percent compared to year-ago period.
The company said increasing imports along with restructuring initiatives led to decline in Q2 deliveries to 3.27 million tonnes, down 2.7 percent year-on-year.
"Operating result has turned negative this year, reflecting huge challenges the global steel industry is facing. In the UK these issues have been compounded by unhelpful exchange rates and regulatory costs that are destroying competitiveness," Dr Karl-Ulrich Kohler, MD & CEO of Tata Steel Europe says.
Gaurang Shah, Geojit BNP Paribas Financial Services expects more pressure for the company in coming quarters. "Operations from Europe are definitely going to be a huge strain on the finances going forward," he says.
Revenue from its South East Asian business declined 46.1 percent year-on-year to Rs 2,001 crore during the quarter, impacted by rising imports from China. Reported EBITDA by this region stood at Rs 70 crore for the quarter.
On the positive side, the company has reduced its gross debt by Rs 2,903 crore during the quarter. It said gross debt has reduced from Rs 82,380 crore in end June 2015 to Rs 80,903 crore after taking into account foreign currency translation impact of Rs 1,213 crore.
Consolidated finance cost dropped 15 percent to Rs 1,048.7 crore from Rs 1,232.8 crore year-on-year.
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