Tata Steel Q1 consolidated PAT at Rs 8,907 cr vs loss of Rs 4,416 cr YoY

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Tata Steel, the country’s oldest steel producer, reported a consolidated net profit of Rs 8,907 crore in June quarter as against a loss of Rs 4,416 crore in the corresponding period last year on the back of increased revenue in Q1’FY22 and low base on account of Covid-19’s first wave last year.

Led by strong steel prices, top line or total revenue from operations in the period under review stood at Rs 53,372 crore, up 108 per cent from the same period last year, as both India and Europe operations contributed sizeably.

Steel deliveries at Tata Steel Europe increased by 17.4 per cent year-on-year (YoY) to 2.33 million tonnes (MT) in Q1 FY22, while India deliveries were up 41.6 per cent YoY to 4.15 MT. Sequentially, both regions saw a decline in steel deliveries due to partial lockdowns and temporary shutdowns in few steel consuming sectors in India (second covid-19 wave), and lower flex sales in Europe.

As per Bloomberg estimates, consolidated net sales was seen at Rs 52,497 crore, while analysts had estimated the EBIDTA and bottomline to be at Rs 16,219 crore and Rs 8,997 crore, respectively. So, while the topline beat estimates, EBITDA (at Rs 16,185 crore) and net profit fell a tad short of expectations. EBITDA is earnings before, interest, taxes, depreciation and amortisation.

Tata Steel’s results came after market hours on Thursday. Its GDR, listed on the London Stock Exchange, was down by one per cent at 8.30 pm India time.

“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,” TV Narendran, chief executive officer and managing director was quoted as saying.

Narendran, further, added that demand has begun recovering in India, though domestic steel prices continue to be at a steep discount to China import parity prices. “We continue to focus on our objective to attain and retain market leadership in chosen segments by building strong customer relationships, superior distribution network, rolling out brands and developing new products & solutions in steel and new materials,” he said.

The consolidated EBITDA increased 13.3 per cent sequentially and 25.7 times YoY to Rs 16,185 crore with improved realisation across key entities. Tata Steel India operations registered the highest-ever quarterly EBITDA at Rs 10,274 crore, with 11.6 per cent in quarter-on-quarter and 8 times YoY growth in Q1 FY22.

Alongside, Europe EBITDA improved sharply to 150 million pound in the quarter under review.

While consolidated topline for the period under review is the highest-ever quarterly sales for Tata Steel (data available from June 2004), EBITDA and net profit are also the highest since March 2018 quarter.

On a consolidated basis, Tata Steel generated free cash flow of Rs 3,553 crore during Q1’FY22 despite working capital absorbing Rs 8,272 crore. Free cash flow is cash flow from operations (minus) capital expenditure (capex). With regard to debt, the gross debt reduced to Rs 84,237 crore with debt repayment of Rs 5,894 crore. Net debt as on June 30, 2021, declined to Rs 73,973 crore. The company’s net debt/EBITDA improved to 1.59x, while net debt/equity improved to 0.91x.

“We continue to prioritise capex spend on ongoing projects and strategically essential investments,” the company’s release quoted Koushik Chatterjee, executive director and chief financial officer as saying.

The company spent Rs 2,011 crore on capex during the quarter; work on the Pellet plant, the Cold Roll Mill complex and the 5 MT per annum expansion at Kalinganagar is ongoing, said the company.