Tata Steel beats estimates with 7.5x growth in Q2 profit

Tata Steel Ltd, India’s largest steel company by revenue, posted better-than-expected results for the quarter ended September 30 with profit coming ahead of what analysts had projected while sales matched street estimates.

Consolidated net profit jumped more than seven-fold to Rs 12,548 crore from Rs 1,665 crore a year earlier. Profit was up 28% from the previous quarter. Analysts had expected net profit to rise to around Rs 12,000 crore.

Consolidated turnover rose 55% to Rs 60,283 crore during the three months ended September 30, 2021 from Rs 38,940 crore a year earlier.

Tata Steel’s share price has more than tripled over the last 12 months to hit a peak in August and has corrected since then. It was down 1.1% and was quoting at Rs 1,284.6 apiece on the BSE in a weak Mumbai market on Friday.

The company’s results were declared after trading stopped for the day on Thursday.

Tata Steel Q2: Other Highlights

1) Consolidated adjusted EBITDA increased 12% QoQ to Rs 17,810 crore; it grew over three-fold from Q2 FY21.

2) Gross debt decreased to Rs 78,163 crore with repayments of Rs 11,424 crore in H1 FY22.

3) Net debt declined to Rs 68,860 crore; net debt to EBITDA improved to 1.21.

4) India crude steel production increased 2.2% QoQ and 3.1% YoY to 4.73 million tonnes.

5) Global steel production rose 7% YoY to 7.77 million tonnes.

6) India deliveries declined 9% YoY but increased 11% QoQ to 4.58 million tonnes despite demand contraction amidst seasonal weakness.

7) Sales volume to automotive segment increased 18% QoQ despite semiconductor shortage-driven weakness in the sector.

8) Consolidated deliveries declined 6.8% YoY but rose 3.9% to 7.39 million tonnes.

9) Revenue at Tata Steel Europe increased 11% QoQ and 50% YoY to £2.1 billion in Q2 FY22

10) EBITDA at Tata Steel Europe jumped 2.2 times QoQ to £328 million. This translates to EBITDA per tonne of £153.

Tata Steel management commentary

TV Narendran, CEO and managing director, said Tata Steel delivered strong results across key regions in the seasonally weaker quarter. He said steel deliveries in India expanded 11% despite a contraction in demand.

Performance in key segments such as auto was robust despite the sector being impacted by the chip shortage while European operations also delivered robust performance underpinned by strong improvement in realizations, he said.

“We are watchful of the elevated coal prices and high energy cost as key risks to margins going forward,” he added.

Koushik Chatterjee, executive director and chief financial officer, said the operating cash flows continue to be strong despite working capital pressure due to price effect on coal price increase in recent months.

“We signed and closed the divestment of our 100% holding in NatSteel Holdings in this quarter to realise around Rs 1,200 crore that resulted in a realised gain of Rs 720 crore for the quarter,” he said.

“As part of our enterprise strategy, we continue to deploy the free cash flows for de-leveraging the balance sheet with Rs 11,424 crore of debt repayment in the first half of the current financial year and are targeting additional, aggressive deleveraging in the second half as well,” Chatterjee added.