Tata Steel reclaimed its profit-leadership credentials in the Tata Group after being overshadowed for a decade by Tata Consultancy Services (TCS), underscoring the bottom-line impact of an unprecedented global commodities upcycle that has coincided with robust economic recovery in India.
Record inflation in Europe and the US in the aftermath of ultra-loose monetary policies has boosted commodity companies, while technology services have encountered higher competition and lower-than-expected profit expansions due to spiralling costs and an unceasing global war for top talent.
Through FY22, Tata Steel reported a consolidated profit after tax of ₹41,749 crore. The crown jewel of the coffee-to-cars conglomerate since its public listing a decade-and-a-half ago, TCS reported a net profit of ₹38,327 crore.
To be sure, the market capitalisations of both entities are still at the opposing ends of the earnings-based valuation spectrum. At nearly ₹13 lakh crore, TCS is India’s second-most valuable company, while Asia’s oldest steel maker is valued at around ₹1.6 lakh crore.
Tata Steel on Tuesday reported a 37% increase in consolidated net profit at ₹9,835 crore in the last quarter of FY22 on the back of improved sales volume across its businesses. “In India, steel demand rose by 4% QoQ. The performance was broad-based with all segments doing well in terms of demand,” said TV Narendran, chief executive officer of Tata Steel.
EU Revenues Surge by 54%
The company reported its highest ever consolidated earnings before interest, taxes, depreciation and amortisation (Ebitda) of Rs 63,830 crore, with an Ebitda per tonne of Rs 21,626 for FY22. “Coking coal prices touched $500 a tonne and the steel market continues to be volatile…,” Narendran said during the media conference on Tuesday.
The board of directors of Tata Steel has recommended a dividend of Rs. 51 per fully paid equity share and Rs 12.75 per partly paid equity share. The company also announced a 10:1 recommended stock split. “The company is announcing splitting of the shares to Re 1 per share face value in a 10:1 split,” Tata Steel Group CFO Koushik Chatterjee said. The company’s European operations delivered better-than-expected performance as a transformation programme helped leverage the strong business environment, Narendran said.
European operations reported an Ebitda per tonne of Rs 18,135. Overall revenue for the EU operations increased by 54% YoY to GBP 8.9 billion (or equivalent of $11.12 billion).
The company’s gross debt stood at Rs 75,561 crore at the end of FY22, with net repayment of Rs.15,232 crore. Net debt declined to Rs 51,049 crore and net debt to Ebitda improved to 0.80 times, the company said in a statement. Its consolidated free cash flow was at Rs. 27,185 crore. “We will be deleveraging at the same rate of $1 billion a year…last year we surpassed the target. We will grow as well as deleverage,” Narendran said.
Capex for FY22 was around Rs 10,522 crore which was within the guidance of Rs 10,000-Rs 12,000 crore. “We are estimating guidance of around Rs 12,000 crore for FY23…around Rs 8,500 crore will be for India operations and the rest for EU operations,” said Narendran.
The company’s India operations achieved the highest-ever annual crude steel production of 19.06 million tonnes (MT), with a growth of 13% Yoy. The company reported the highest ever deliveries of 18.27 MT during the financial year under review. “Automotive sales were up 27% yoy, branded products and retail were up 11% yoy, while industrial products & projects were up 11% yoy,” the company said in the statement.