Tata Steel on Friday reported a sharp 54% jump in its consolidated net profit at Rs 1,753 crore for the three months to December, though much below Bloomberg consensus estimates of Rs 2,231.3 crore.
Tata Steel on Friday reported a sharp 54% jump in its consolidated net profit at Rs 1,753 crore for the three months to December, though much below Bloomberg consensus estimates of Rs 2,231.3 crore. While the realisations remained strong, the volumes in Tata Steel BSL (erstwhile Bhushan Steel) were affected due to softer demand during the quarter, mainly in automotive and appliance segments, and inventory replenishment.
Consolidated net sales in Q3FY19 increased 23% y-o-y to Rs 41,220 crore, much above the consensus estimates of Rs 40,282 crore, on the back of better realisations and the overall higher volumes. The company restated the Ebitda figures during the quarter to exclude share of JV and Associates, and adjusted for fair value changes on account of exchange rate movement on investments in Tata Steel Holdings and revaluation on external or internal company debts and receivables at Tata Steel Global Holdings; Tata Steel BSL. Consequently, the consolidated adjusted Ebitda (earnings before interest, taxes, depreciation and amortisation) rose by a hefty 27% y-o-y to Rs 7,225 crore, driving up the Ebitda margin by 60 basis points to 17.5%. The adjusted Ebitda/tonne for the India business stood at Rs 16,404, up nearly 15% y-o-y.
TV Narendran, CEO and MD, Tata Steel, said that despite a sharp drop in international steel prices, the company was able to maintain its overall realizations and increase volumes significantly in India. In an impressive performance, India steel production grew by 34% y-o-y to 4.38 million tonnes with the acquisition and ramp-up of Tata Steel BSL. India deliveries stood at 3.89 million tonne and now account for more than 55% of consolidated volumes. Also, the company increased its market share in automotive, industrial products and projects, branded products, retail and solutions segment.
Tata Steel said in its investor presentation that the performance comes at a time when the domestic steel demand softened during the quarter, net imports increased with correction in regional steel prices, steel prices corrected from mid of Q3FY19 and pressure on domestic steel industry margins was accentuated by strong coking coal and domestic iron ore prices.
Koushik Chatterjee, executive director and CFO, observed that the market environment for the industry was challenging during the quarter with softening of steel prices. Tata Steel’s gross debt decreased by Rs 9,083 crore during the quarter, including de-leveraging of over Rs 6,000 crore, and stood at over Rs 1.09 crore. He said the company has repaid Rs 3,000 crore from Tata Steel BSL since the acquisition as part of the overall de-leveraging.
Chatterjee said the liquidity position of the group remains strong at Rs 19,320 crore, including Rs 8,549 crore of cash and cash equivalents.
Last month, Tata Steel signed definitive agreements to divest 70% stake of its Southeast Asia operating entities for a cash consideration of $327 million. The transaction is expected to be completed in Q1FY20. The proceeds will be used for deleveraging. Upon completion of the transaction, consolidated gross debt will come down by around $500 million. The company has also divested its remaining 26.62% equity stake in TRL Krosaki for Rs 305 crore.