Tata Steel on Friday posted a good set of numbers for the October-December 2021 quarter, beating Street estimates on all fronts. The company’s consolidated net profit surged 139% year-on-year to Rs 9,598 crore on the back of improved realisations, as steel prices continued their upward trajectory. The net profit was ahead of the estimated at Rs 9,018 crore according to Bloomberg’s poll of analysts.
The company reported a sharp 45% y-o-y surge in consolidated revenues from operations at Rs 60,783 crore, as improvement in net realisations more than offset the drop in volumes. Analysts had estimated the revenue at Rs 59,679 crore. While the steel production remained flat on a y-o-y basis at 7.76 million tonne, the steel deliveries dipped 5.4% y-o-y to 7.01 million tonne.
Ebitda (earnings before interest, tax, depreciation and amortisation) was up 64% y-o-y to Rs 15,853 crore. The company posted strong operating cash flows in the quarter despite a significant surge in international coal prices and increased working capital requirements, it said in a statement. Consequently, the operating margins increased 300 basis points to 26% during the quarter ended December 31, 2021.
Commenting on the company’s performance, T V Narendran, chief executive officer and managing director said, “India steel demand has begun to improve on the back of continued economic recovery as the third wave of Covid begins to ebb. We continue to drive value accretive growth in our chosen segments and our performance in key segments such as auto was robust despite the sector being impacted by the semiconductor shortage. Our European operations continue to perform underpinned by strong improvement in realisations.”
Tata Steel’s India operations reported a 4% y-o-y increase in crude steel production to 4.81 million tonne, while the domestic deliveries declined by 5% to 4.42 million tonne. However, sales volume to automotive segment remained steady despite 9% drop in auto OEM production due to semiconductor shortages. The quarterly adjusted Ebitda stood at Rs 12,434 crore and profit after tax at Rs 7,787 crore. In its European operations, revenues increased 56% y-o-y to £2,246 million in Q3FY22, while Ebitda was £290 million translating to an Ebitda per tonne of £134.
The company said that it had repaid Rs 17,376 crore of debt in the first nine months on the financial year and the net debt as at the end of December was at `62,869 crore. Consolidated capex for the quarter was Rs 2,790 crore taking the nine months capex to Rs 6,416 crore. Tata Steel generated strong free cash flows of Rs 6,338 crore for the quarter which were used to reduce the debt.
Koushik Chatterjee, executive director and chief financial officer said, “Despite market volatility, the revenues were broadly stable and the capex is well within the earlier guidance. Tata Steel continues to remain focused on its enterprise strategy to deleverage its balance sheet while it pursues its growth priorities. As a result of the strong financial performance, our net debt to Ebitda has come down further to less than 1x and the financial metrics of the company continue to be at investment grade level.”
The company in a statement said that the merger of Tata Steel BSL with Tata Steel has been completed. Tata Steel Long Products has been declared the winning bidder for acquisition of Neelachal Ispat Nigam Limited, and Chatterjee said that the company was progressing on the formalities. The acquisition will be financed by largely through a combination of internal accruals and bridge funding, he said.