Tata Steel consol Q3 PAT at Rs 3,698 cr vs Rs 1,029 cr loss a year ago

Higher revenue, lower expenses push up bottomline which was ahead of estimates

Tata Steel, the country’s oldest steel producer, reported a consolidated net profit of Rs 3,698 crore in the December quarter as against a loss of Rs 1,029 crore in the corresponding period last year on the back of increased revenue, which was aided by both higher steel prices and volumes. The profit was ahead of consensus estimate of Rs 3,353 crore, according to Bloomberg, mainly led by the India operations.

The company’s net sales in the period under review stood at Rs 38,806 crore, up 12 percent from same period last year on improved demand for steel in the domestic market, and were largely in line with expectations of Rs 38,982 crore.

"The recovery in the global and Indian economy has led to sharp improvement in steel demand in India. We pivoted our deliveries to domestic markets, to cater to the requirements of our local customers by reducing exports. All the segments, especially automotive, have performed extremely well supported by our continuous focus on strong customer relationships, superior distribution network, brands and new product developments," T. V. Narendran, chief executive officer and managing director was quoted as saying.

In India operations, deliveries grew 8 percent on quarter-on-quarter basis and 4 percent on year-on-year basis to 4.16 million tonne. Exports shrank below 11 percent of overall deliveries. Sales witnessed strong momentum but was constrained by lower opening inventory, informed Tata Steel.

The company’s consolidated earnings before, interest, taxes, depreciation and ammortisation (EBITDA) in the quarter gone by stood at Rs 9,540 crore, more than double of Rs 3,659 crore in the same period last year.

"In Europe, our underlying performance has improved quarter on quarter while the reported EBITDA was negatively impacted by few one offs. We remain committed to arrive at a strategic and sustainable solution for Tata Steel Europe, though in the immediate term, we will focus upon business performance and cash flows," said Narendran.

The company's consolidated EBITDA increased 53 percent sequentially and 2.6x on year-on-year basis with improved realization across key entities, it said in a release. It was the highest ever consolidated quarterly EBITDA, said Tata Steel.

Consolidated EBITDA per tonne, a measure of profitability, was amongst the best at Rs 13,876, as compared to Rs 8,396 in Q2'FY21 and Rs 5,003 in the year-ago quarter.

"Our key subsidiaries Tata Steel BSL and Tata Steel Long Poducts have also reported the highest ever profitability in recent years," Koushik Chatterjee, executive director and chief financial officer was quoted as saying.

Meanwhile a 4.6 percent drop in company’s expenses in the December quarter compared to year ago also lent some support to the EBITDA. On the other hand, tax expense of Rs 1,572 crore as against Rs 621.04 crore in the same period last year ate into the profits of the company.

An employee separation compensation of Rs 228.84 crore in the period under review (part of exceptional item) also further ate into the bottomline of the company. Overall, exceptional items totalled Rs 329 crore in the year ago period as compared to Rs 154 crore in the recently concluded quarter.

The company generated consolidated free cash flow was Rs 12,078 crore during the third quarter driven by strong operating performance, disciplined capital expenditure and working capital management.

With regard to capital expenditure the company continues to prioritize the same and has spent Rs 1,394 crores during the quarter. The company has also decided to restart work on pellet plant and cold roll mill complex at Tata Steel Kalinganagar. Both the pellet plant and cold roll mill complex, once completed, will expand margin, it said.

As part of the enterprise deleveraging plan, Tata Steel has completed reduction of net debt by Rs 18,609 crore in the first nine months of the current financial year. During the third quarter, the company reduced the leverage by Rs 10,325 crore. As part of the continued de-leveraging strategy further deleveraging is being undertaken in 4QFY21, it said.

Following the termination of the discussions with SSAB on Tata Steel Netherland (TSN), the company will be focusing on performance and cash flows in the immediate term. Tata Steel is committed to arrive at a strategic and sustainable resolution for its European portfolio.

Tata Steel’s IJmuiden plant is among the most environmentally efficient and cost competitive steel producers in Europe. The process to separate Tata Steel Netherlands and Tata Steel UK is currently underway, informed Tata Steel.

The results were announced post market hours in India. On the London Stock Exchange, Tata Steel's GDR price was up 3 per cent following the results announcement, at 9 pm India time.