Tata Steel now takes a more prudent approach to its capital allocation strategy.
Tata Steel, the flagship company of Tata Group, announced its July-September quarter results on November 11. It reported a profit after tax (PAT) of Rs 12,548 crore, a 7.5-fold jump from Rs 1,665 crore in the corresponding quarter last year and by 28% from Rs 9,768 crore in the previous quarter, helped by strong performance across geographies.
The consolidated revenues at Rs 60,282.8 crore climbed up 55% from Rs 38,940 crore recorded in the corresponding quarter last year. On a q-o-q basis, revenues increased by 13% from Rs 53,372 crore reported in the previous quarter.
Robust performance in both its domestic and overseas businesses helped the company report strong growth in this quarter.
“Tata Steel has delivered strong results across key geographies in this seasonally weaker quarter. Our steel deliveries in India expanded by 11% despite a contraction in market demand, which is a testament to the strength of our franchise”, said T V Narendran, Chief Executive Officer & Managing Director, while commenting on the performance of the company.
The steelmaker continued to drive value accretive growth in its chosen segments and its performance in key segments such as auto was very robust despite the sector being impacted by the semiconductor shortage, he added.
“Our European operations have also delivered robust performance underpinned by strong improvement in realizations. We are watchful of the elevated coal prices and high energy cost as key risks to margins going forward”, said Narendran.
Steel Production and Deliveries
Crude steel production for Tata Steel increased by 2.2% q-o-q and by 3.1% y-o-y to 4.73 million tons.
The company delivered 4.58 million tons of steel in this quarter, which was higher by 11% q-o-q and dispatches to automotive segments increased by 18% q-o-q despite weakness in the sector due to semiconductor shortage.
“Tata Steel posted its highest ever underlying quarterly performance on the back of strong operating and market performance across all geographies including Europe,” said Koushik Chatterjee, Executive Director and Chief Financial Officer.
Consolidated EBIDTA margin for the company stood at 27.6% and PAT margin at 20.8% for the quarter.
Consolidated adjusted EBITDA for the quarter increased by 12% q-o-q to Rs 17,810 crore. Compared to last year, adjusted EBITDA increased 3.2x from Rs 5,527 crore.
For India operations, the adjusted EBITDA stood at Rs 13,877 crore, a growth of 2.1% q-o-q and 2.3x y-o-y.
EBITDA per ton for India operations for the quarter stood at Rs 30,272/ton, which was down 7% from the previous quarter but it was up by 154% from Rs 11,912/ton for the same period of last year.
Profit after tax stood at Rs 8,843 crore.
On a standalone basis, Tata Steel registered the highest ever adjusted EBITDA at Rs 13,574 crore in this quarter, registering a growth of 4% q-o-q and 2.3x y-o-y.
Tata Steel Long Products registered a quarterly EBITDA of Rs 302 crore.
Tata steel Europe operations also witnessed robust growth in revenues, which increased by 11% q-o-q and 50% y-o-y to 2,108 million pounds in this quarter.
EBITDA for Europe improved 2.2x q-o-q to 328 million pounds, resulting in an EBITDA per ton of 153 pounds.
Consolidated EBITDA per ton for the quarter stood at Rs 24,112/ton increasing by 8% from the previous quarter and by 246% on a y-o-y basis.
Free Cash Flows and Capex
Tata Steel generated consolidated free cash flows of Rs 3,322 crore during the quarter even though the working capital increased by Rs 3,889 crore and company made dividend payments of Rs 3,020 crores.
“As part of our enterprise strategy, we continue to deploy the free cash flows for de-leveraging the balance sheet with Rs 11,424 crore of debt repayment in the first half of the current financial year and are targeting additional, aggressive deleveraging in the second half as well,” said Chatterjee. The financial metrics of the company are now at investment grade levels and Standard & Poor has upgraded the company to an investment grade level of BBB-, he added
The company spent Rs 2,191 crore on capex during the quarter. Work on the pellet plant, the cold roll mill complex and the 5 MTPA expansion at Kalinganagar is ongoing.
The Tata Steel stock closed at Rs 1,299.6 today, up Rs 1.05 from its previous close. The stock, which has generated returns of 174% in the past one year and 102% during this financial year till date, has been trading flat in the past one month.