Tata Steel Ltd shot past analysts’ estimates to report a profit of ?4,010 crore in the December quarter as demand and prices of the metal surged in India, although the company’s European operations continued to underperform.
The fiscal third-quarter earnings are a significant turnaround for India’s second-largest steelmaker, which posted a loss of ?1,228 crore in the year-ago quarter. A Bloomberg poll of 15 analysts had estimated a profit of ?3,227.60 crore for the third quarter.
Consolidated revenue rose over 11% to ?39,809 crore during the quarter. It beat the ?38,982.40 crore estimate by 14 analysts.
Indian steelmakers gained from four price hikes made during the quarter, in tandem with a sharp rise in global steel prices. However, they have still managed to keep prices lower than, or in some cases, on par with the landed cost of imported steel.
“The recovery in the global and Indian economy has led to a sharp improvement in steel demand in India,” T.V. Narendran, CEO and managing director at Tata Steel, said in a press statement. “We pivoted our deliveries to domestic markets, to cater to the requirements of our local customers by reducing exports. All segments, especially automotive, have performed extremely well, supported by our continuous focus on strong customer relationships, superior distribution network, brands and new product developments,” he said.
Tata Steel achieved its highest quarterly domestic Ebitda (earnings before interest, tax, depreciation and amortization) of ?8,811 crore, more than doubling from a year ago, driven by higher prices, better product mix, lower exports and operating efficiency initiatives. Its Ebitda per tonne, a key measure of production efficiency, reached ?18,931 and the Ebitda margin stood at 34.9%.
Tata Steel’s domestic crude steel production remained strong at 4.6 million tonnes, up 3% from the previous year.
On 29 January, the company said its talks with Swedish firm SSAB steel for a potential sale of part of its European operations had collapsed. It that following the termination of the talks with SSAB on Tata Steel Netherlands (TSN), the company will be focusing on performance and cash flows in the immediate term. “Tata Steel is committed to arriving at a strategic and sustainable resolution for its European portfolio. The process to separate Tata Steel Netherlands and Tata Steel UK is underway,” a press release from the company said.
Tata Steel Europe reported an Ebitda/tonne loss of $46 per tonne compared to a loss of $27 per tonne in the preceding quarter, a preliminary report by Edelweiss Securities said. “This was a major negative surprise. There is a one-off component pertaining to the reversal of wage support from the Netherlands government and higher provision of carbon emission.”
It added that Tata Steel will continue to prioritize capital expenditure; it spent ?1,394 crore on capex in the quarter and will restart work on a pellet plant and cold roll mill complex at Tata Steel Kalinganagar.
“In Europe, our underlying performance has improved quarter on quarter while the reported Ebidta was negatively impacted by few one-offs,” the firm said.
“Our enterprise strategy on debt management continues to be on target,” said Koushik Chatterjee, executive director and chief financial officer.
“We continued to aggressively reduce our net debt by ?10,325 crore and gross debt by ?5,640 crore in the quarter, taking the nine-month reduction in net debt by ?18,609 crore and gross debt by ?7,649 crore,” Chatterjee said.
News Source:- Livemint