Tata Steel posts highest profit in 9 years in Q2

MUMBAI: Tata Steel posted its highest quarterly profit in nine years to Rs 3,116 crore, aided by strong product prices and robust performance of its India business. The company’s second quarter profit in FY19 jumped more than threefold from Rs 1,018 crore to Rs 3,116 crore. Its turnover increased 34% from Rs 32,464 crore to Rs 43,544 crore in the three months ended September 30.

The earnings were a result of the company sharpening its focus on the Indian market where demand for the metal was robust because of strong activity in the infrastructure space even as it looks to scale down its exposure to the European market. Tata Steel’s India deliveries accounted for 58% of its total deliveries. The company’s operating profit zoomed 93% to Rs 9,000 crore in the second quarter of fiscal 2019.

Tata Steel’s European operations, which is in the process of being merged with German major Thyssenkrupp, was impacted due to lower production. The management said that the two companies are in discussion with the European Union’s antitrust regulator to address competition concerns and secure approvals for the transaction. The regulator, European Commission, had raised concerns over the merged entity becoming a dominant force in certain segments like electrical steel, automotive steel and packaging steel.

Tata Steel MD T V Narendran said that while he remains positive on the steel demand outlook, especially in India, the risk of trade wars and increasing imports remains a concern. India’s oldest alloy producer’s debt increased from Rs 1.16 lakh crore in June-end to Rs 1.18 lakh crore by September-end.

Analysts see the rising debt as one of the key risks to Tata Steel’s outlook. The company’s CFO Koushik Chatterjee said that his priority is to reduce the leverage by about $1 billion in the next 12 months from internal cash flows and other strategic initiatives. Tata Steel generated operating cash flows of Rs 7,769 crore in the second quarter of fiscal 2019. It is also considering divesting its interests in South East operations, electrical steel units in the UK, Canada and Sweden, among other non-core, sub-scale businesses.