Tata Steel Ltd on October 31 reported an 87 percent year-on-year decline in consolidated profit after tax at Rs 1,514 crore for the September quarter. Sequentially, the profit declined 80 percent.
Consolidated revenue for the Tata group company remained flat with a marginal decline of one percent year-on-year to Rs 59,878 crore. Sequentially, they fell 6 percent.
Realisations declined amidst a global meltdown in commodity prices even as a fall in volumes in Europe was negated by an increase in local volumes. A jump in input costs severely dented margins and profitability.
“Concerns about slowdown in key economies, persisting geopolitical issues coupled with seasonal factors led to a volatile operating environment”, said T V Narendran, Chief Executive Officer & Managing Director, while commenting on the performance of the company.
Despite these headwinds, Tata Steel registered best ever domestic sales in India enabled by a strong product portfolio and an extensive distribution network which services end to end requirements in chosen segments, Narendran added.
Production & deliveries
The consolidated production for the quarter at 7.56 million tons (MT) was down 3 percent on year and down 2 percent compared to the previous quarter.
The consolidated deliveries at 7.23 MT were down 2 percent on year but rose 9 percent sequentially.
India deliveries were higher by 21 percent QoQ and 7 percent YoY primarily driven by record domestic deliveries while the European deliveries were lower sequentially due to seasonal factors and subdued demand in Europe.
EBITDA and margins
The company earned a consolidated earnings before interest, tax, depreciation and amortization (EBITDA) of Rs 6,271 crore which was down 62 percent as compared to the same period last year and down 58 percent from the previous quarter.
Consequently, the EBITDA per ton for the quarter tanked ~60 percent on year as well as sequentially to Rs 8,673 from over Rs 22,000 per ton in the prior periods.
Tata Steel’s adjusted standalone business recorded 71.6 percent decline in EBITDA per ton to Rs 8,741/tonne while the company’s European division registered a drop of 38.9 percent to Rs 9,540/tonne.
Tata Steel Long Products’ division numbers aren’t fully comparable due to Neelachal Ispat Nigam Limited (NINL) acquisition. The division reported Ebitda per ton loss of Rs 14,594/tonne. Tata Steel Thailand recorded a dip of 86.3 percent at Rs 1,005 per ton.
Increase in debt
Tata steel’s gross debt for the quarter ended September 30, 2022 stood at Rs 87,516 crore against Rs 82,597 crore in June quarter, up 5.96 percent. Bunching up of large cash payouts of Rs 19,000 crore in Q2, on account of NINL acquisition combined with FY22 dividend payout and growth capex drove increase in gross debt, the company said in its earnings release.
The 6 MTPA (million tons per annum) Pellet plant will be commissioned in Q3FY23 and will be followed by the Cold Roll Mill complex in phases. The company said that the 5 MTPA expansion at Kalinganagar is on track for commissioning by end FY24.
Tata Steel started the blast furnace of Neelachal Ispat Nigam (NINL)’s in October, within 3 months of completion of the acquisition and is being ramped up.
The Board of the company has approved the amalgamation proposal of seven listed and unlisted entities into Tata Steel, a value accretive merger with multiple benefits.
Commenting on the outlook for the second half of current fiscal, Koushik Chatterjee, Executive Director and Chief Financial Officer said that, “
The operating environment should gradually improve in H2FY23 on government measures and restocking and the margins should benefit across geographies from gradual recovery in Indian markets and favourable movement in raw material prices, especially coking coal”. He expresses concerns about the energy costs in Europe which continue to remain a key watch point.
Tata Steel closed flat at Rs 101.6 on the National Stock Exchange on October 28. The stock has fallen 22 percent over the past one year but has generated returns of seven percent over the past one month.