Tata Steel Q2 net halves to Rs 1,665 cr as tax expenses hit bottom line

This, even as sales jumped 7.4% YoY and capacity utilisation reaches normal levels

Tata Steel, the country’s oldest steel producer, reported a consolidated net profit of Rs 1,665 crore in the September quarter, down 50 per cent from same period last year as tax expenses ate into the profits even as sales were up.

Net sales of the company stood at Rs 36,475.66 crore in the period under review, up 7.4 per cent from same period last year due to higher volumes, improved realisations and cost efficiencies.

Tax expense of Rs 613 crore in the September quarter hurt the company’s bottomline in the period under review.

“The resilience of our business model and the commitment of our teams enabled us to ramp up capacity utilisation to normal levels and achieve highest ever sales despite the ongoing challenges due to the COVID pandemic. There has also been a significant improvement in product mix towards domestic sales and higher value-added products and a sharp reduction in costs. In Europe, though the overall environment remains challenging and recovery is more gradual, there has been an improvement in volumes and sales mix," the release quoted T V Narendran, chief executive officer and managing director at Tata Steel.

The company's consolidated earnings before interest, taxes, depreciation and ammortisation (EBITDA) surged 60 percent year-on-yeat to Rs 6,217 crore in the September quarter, said the release.

In the period under review, Tata Steel generated a free cash flow of Rs 7,832 crore.

On a standalone basis, the company’s topline stood at Rs 16,100 crore in the quarter gone by, up 11 percent from last year, while bottomline was at Rs 2,205 crore, down 42 percent from the corresponding period last year as tax expense of Rs 735 crore ate into the earnings.

All major plants in India are operating close to full capacity utilization. Also, the company's quarterly deliveries at India operations grew 72 percent sequentially and 22 percent on year-on-year basis, said Tata Steel in its release.

Tata Steel standalone EBITDA surged 33 percent year-on-year to Rs 4,718 crore, which translates into an EBITDA/tonne of Rs 13,127 and an EBITDA margin of 29 percent.

Meanwhile, the company has initiated discussions with SSAB Sweden based on interest received for the potential acquisition of Tata Steel’s Netherland business including Ijmuiden steelworks.

"The company has also commenced discussions with the Supervisory Board and Board of Management of Tata Steel Netherlands and the process will move to the next stage including due diligence and stakeholders’ consultations. The company is committed to deploy proceeds of any strategic restructuring towards additional deleveraging of the balance sheet," it said.

With regard to its debt reduction strategy, the company said it is committed to deleveraging of $1 billion annually and has reduced net debt by Rs 8,197 crore during the quarter.

The company has also initiated the process to separate Tata Steel Netherlands and Tata Steel UK and will pursue separate strategic paths for the Netherlands and UK business in the future, informed Tata Steel.

"Tata Steel continues its dialogue with the UK Government on potential measures to safeguard the long-term future of Tata Steel UK and is also reviewing all options to make the business self-sustaining without the need for any funding support from Tata Steel India in the future," it informed.

"In India, we are now embarking on re-organizing our subsidiaries into four verticals to drive scale, synergies and simplification which we are confident will create value for our stakeholders," Narendran was quoted as saying.

Tata Steel is folding its listed and unlisted subsidiaries in the domestic market into four clusters--long products, downstream, mining and utilities & infrastructure.

Today, the Boards of Tata Steel Long Products, Tata Metaliks and Indian Steel and Wire Products approved the merger of Tata Metaliks and Indian Steel and Wire Products into Tata Steel Long products.

"The proposed consolidation will create significant synergies and position the company towards future growth in the long products segment. We expect to complete the process in next 6-9 months, subject to necessary regulatory approvals," said the management in its release.