Tata Steel profit soars to Rs 9,768 crore as steel prices rally

On the back of rising steel prices, the company reported its highest-ever Ebitda which increased 25.7x on a y-o-y basis to Rs 16,185 crore. Consequently, the Ebitda margins surged to 30.3% during the quarter versus just 4.3% reported in April-June 2020.

Tata Steel on Thursday reported robust numbers for the quarter ended June 30 as its net profit soared on the back of a global rally in steel prices and improved performance in the European business. The company beat Bloomberg’s consensus estimates as it reported a record consolidated net profit of Rs 9,768 crore during the quarter versus the highest-ever consolidated net loss of Rs 4,609 crore in the corresponding quarter last year. The profits were higher than the full-year profits reported by Tata Steel for FY21.

Net sales more than doubled to Rs 53,372 crore on a year-on-year basis and remained above analyst estimates. Steel deliveries, which were severely impacted due to the national lockdown around the same time last year, recovered well and were up 33% y-o-y at 7.11 million tonne. However, the impact of the second wave led to a fall of 9% in deliveries on a quarter-on-quarter basis.

TV Narendran, CEO and MD, Tata Steel, said, “Over the last 15 months, the global economy has been recovering driven by policy support and progressive vaccination which has led to improvement in business and customer confidence. However, Indian markets were adversely impacted again during the last quarter due to the 2nd wave of Covid-19, which impacted our steel production as well as deliveries. Demand has begun recovering in India, though domestic steel prices continue to be at a steep discount to China import parity prices.”

Steel production was impacted by the supply of liquid medical oxygen to hospitals, leading to a moderate decline of 1.7% sequentially to 7.88 million tonne. However, coming from a low base of last year, it was up a good 42% y-o-y.

On the back of rising steel prices, the company reported its highest-ever Ebitda which increased 25.7x on a y-o-y basis to Rs 16,185 crore. Consequently, the Ebitda margins surged to 30.3% during the quarter versus just 4.3% reported in April-June 2020.

Consolidated free cash flow was Rs 3,553 crore despite working capital absorbing Rs 8,272 crore. The company spent Rs 2,011 crore on capex during the quarter, with the ongoing work on the pellet plant, the Cold Roll Mill complex and the 5 MTPA expansion at Kalinganagar.

Narendran said the 5 MTPA Tata Steel Kalinganagar phase-II expansion is progressing well, which will drive product mix enrichment and cost reduction. The 6 MTPA pellet plant and the CRM complex are expected to be commissioned by the first half of 2022.

Tata Steel’s gross debt decreased to Rs 84,237 crore with debt repayment of Rs 5,894 crore. Net debt fell to Rs 73,973 crore, which improved net debt to Ebitda ratio to 1.59x and net debt to equity improved to 0.91x.

Koushik Chatterjee, executive director and CFO, Tata Steel, said, “We are committed to deleverage further and expect to bring down the debt significantly by the end of the current financial year. We continue to prioritise capex spend on ongoing projects and strategically essential investments. The group liquidity position remains strong at Rs 20,695 crore, including Rs 10,264 crore of cash and cash equivalents.”