Tata Steel on Monday reported a consolidated net profit of Rs 921 crore for the three months to June, a shade below Bloomberg consensus estimates of Rs 1,142 crore. Profit was dragged down by a provision of Rs 617 crore mainly relating to mining-related litigation. In the June 2016 quarter, the steel maker reported a net loss of Rs 3,183 crore.
Revenues in Q1FY18 grew 19.26% year-on-year to Rs 30,973 crore, ahead of consensus estimates of Rs 28,468 crore. Moreover, the earnings before interest, taxes, depreciation and amortisation or Ebitda margin expanded a smart 360 basis points to 16%, driving up the consolidated Ebitda by a hefty 49.53% year-on-year.
Koushik Chatterjee, group ED (finance and corporate), observed the strong performance was due to higher volumes in India and the improved operating performance in Europe.
Tata Steel’s gross debt rose to Rs 87,812 crore at the end of June, an increase of nearly Rs 4,798 crore over that in March, pushed up by a forex impact, inventory build-up following the roll-out of the goods and services tax and seasonal trends in Europe.
Chatterjee said the situation was expected to be temporary. “The liquidity position of the group remains very robust with Rs 16,109 crore in cash and cash equivalents alone. The capital expenditure for the quarter was around Rs 1,484 crore which is in line with the plan announced earlier,” he added.
The firm’s net debt declined significantly to Rs 71,703 crore as a result of a build-up in cash reserves to fund the £550-million pension payout to workers in the UK.
“We are in advanced discussions with the various pension regulators and authorities and are hopeful of reaching a final agreement shortly,” Chatterjee added.
In an impressive performance, domestic deliveries rose 28% on an annualised basis in the June quarter largely due to the ramp-up of the Kalinganagar facility.
However, the company witnessed a sequential decline of 14% due to seasonal factors, GST and planned shutdowns.
Tata Steel’s performance in Europe was creditable with revenues rising 28% on year to £1,703 million, reflecting improved market conditions and increased sales of differentiated products.
During the quarter, the company sold its stake in Tata Motors for a gross consideration of around Rs 3,778 crore. “With this sale, we have monetised over Rs 14,266 crore of divestments over the last five years. The restructuring of the Tata Steel Europe is now complete with the sale of 42-inch and 84-inch pipe mills in Hartlepool, UK, to Liberty House Group,” Chatterjee said.