Tata Steel returns to profit with Rs1,018-crore Q2 net
31 October 2017
Tata Steel has reported a net profit of Rs1,018 crore in the July-September 2017-18 quarter against a net loss of Rs49 crore in the same quarter of the previous year, on the back of higher production and better realisation.
Tata Steel's profit was boosted by strong volume growth following the ramp-up of its Kalinganagar plant in India and divestment of loss-making UK operations.
Consolidated quarterly steel deliveries were up 15 per cent at 6.45 million tonnes, with Indian deliveries contributing about 48 per cent of the total. Deliveries from India operations grew 17 per cent year-on-year to 3.08 million tonnes in the quarter, the company stated.
Tata Steel said its long products and specialty steels businesses have been re-classified as held for sale/ discontinued operations. The previous year's figures have also been re-stated accordingly.
Consolidated quarterly revenues stood at Rs32,464 crore, up 20 per cent year-on-year and up 5 per cent from the previous quarter. EBITDA for the quarter stood at Rs4,726 crore, with an EBITDA margin of 14.6 per cent.
Consolidated after-tax profit (PAT) stood at Rs1,018 crore, against a loss of Rs49 crore in the similar quarter last fiscal and Rs921 crore in the first quarter of the current financial year.
Tata Steel said its gross debt increased by about Rs2,447 crore and stood at Rs 90,259 crore, mainly due to increase in working capital lines and forex impact. The liquidity position of the group remains very robust with approximately Rs19,800 crore in cash and cash equivalents and undrawn bank lines.
Capital expenditure for the quarter was around Rs1,834 crore.
Deliveries grew 17 per cent year-on-year and 12 per cent quarter-over-quarter to 3.08 million tonnes in the second quarter despite subdued apparent steel consumption growth - 5 per cent year-on-year and 4 per cent quarter-over-quarter - in India.
Revenues during the quarter (net of impact of excise) were 33 per cent higher year-on-year primarily due to higher deliveries and improved realisations and 8 per cent sequentially due to higher deliveries and higher other operating income.
EBITDA for the quarter stood at Rs3,408 crore, recording a growth of 71 per cent year-on-year and 17 per cent quarter-over-quarter driven by improved realisations and higher volumes primarily due to higher volumes.
Sales volume recorded broad based growth across several verticals, facilitated by Tata Steel Kalinganagar works ramp-up and higher material availability and entry into new segments with better product range.
Automotive segment delivered market beating volume growth of 34 per cent year-on-year and 25 per cent quarter-over-quarter with sales of high-end and automotive steel sales growing by 23 per cent year-on-year and 14 per cent sequentially.
Sales of branded products, retail and solutions segment grew 14 per cent year-on-year and 9 per cent sequentially supported by 14 per cent annual growth and 16 per cent quarterly growth in sales to emerging customer accounts.
Industrial products, projects and exports segment grew 11 per cent year-on-year and 8 per cent quarter-over-quarter with strong 60 per cent annual growth and 18 per cent sequential growth in targeted value added and new segment sales.
Tata Steel's European operations saw liquid steel production fall 3 per cent annually and 7 per cent sequentially to 2.60 million tonnes in second quarter of fiscal 2017-18.
Deliveries, however, were higher by 15 per cent year-on-year and 8 per cent sequentially, in part due to one-off sales and supply chain improvements.
Revenues were higher by 32 per cent year-on-year and by 5 per cent sequentially, reflecting higher deliveries and an uplift in the sales of differentiated products.
EBITDA was £89 million, which was £38 million lower than the previous year and £63 million lower on a sequential basis, primarily due to lower spreads with higher raw material prices
Revenue for South East Asia operations increased by around 22 per cent both on annual and quarterly basis to Rs2,424 crore,
EBITDA improved to Rs135 crore in the second quarter of the current fiscal from Rs22 crore in the first quarter with higher deliveries and improved spreads.
''Tata Steel witnessed strong volume growth during the quarter as the smooth ramp up of our Kalinganagar Steel plant coupled with our strong marketing franchise enabled us to expand our customer universe and increase our market share. This is against the backdrop of subdued steel demand during the quarter with slow construction activity, weak rural demand and poor consumer sentiment,'' said T V Narendran, managing director of Tat Steel.
''Our growth was broad based with all verticals registering strong performance. Our automotive segment grew by 34per cent YoY due to our focus on new grade development and new vehicle models. Our branded products and retail solutions segment sales grew 14 percent YoY with strong volume growth in emerging customer accounts. Our Industrial products, projects and exports segment grew 11 per cent YoY, including a 60 per cent year-on-year growth in our targeted value added and new segment sales,'' he added.
During the quarter, Tata Steel developed 27 new products across various customer segments.
''Globally, there was a recovery in the commodity cycle with cuts in Chinese steel capacities and stronger demand resulting in improving utilization levels of mills in China to more than 85 per cent. This coupled with recent uptick in the raw material prices has lifted the steel prices across regions,'' said Koushik Chatterjee, group executive director.
During the quarter, Tata Steel Europe signed a memorandum of understanding for a 50:50 joint venture with Thyssenkrupp to create a leading European steel enterprise
Besides, the UK pensions regulator approved the regulatory apportionment agreement in respect of BSPS and payment of GBP 550 million has been completed. The BSPS has been now separated from Tata Steel UK and number of affiliated companies. The next step would be completion of necessary formalities to set up a new scheme with lower risk profile following member consent process led by trustee.
Tat Steel also completed the sale of 42-inch and 84-inch pipe mills in Hartlepool to Liberty House group.
The company also acquired full intellectual property rights in Hlsarna technology which has the potential to reduce energy use and carbon emissions by at least 20 per cent, as well as reducing the steel making costs through lower priced raw materials.