Tata Steel consolidated net jumps over 7 times

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Updated: November 12, 2021 7:45 AM

The sharp increase in profits was supported by higher realisations and sale of Singapore entity NatSteel Holdings, even as steel deliveries declined in a seasonally-weak quarter.

tata steelSales volume of the automotive segment increased by 18% sequentially, despite the semiconductor shortage driven weakness in the sector.

Tata Steel on Thursday reported a 7.5-times jump in its consolidated net profit for the quarter ended September 30, 2021. The sharp increase in profits was supported by higher realisations and sale of Singapore entity NatSteel Holdings, even as steel deliveries declined in a seasonally-weak quarter.

The company’s net sales for the period increased 55% year-on-year to Rs 60,283 crore. Steel deliveries declined nearly 7% y-o-y during the quarter to 7.39 million tonne. Sales volume of the automotive segment increased by 18% sequentially, despite the semiconductor shortage driven weakness in the sector.

The consolidated Ebitda (earnings before interest, tax, depreciation and amortisation) increased 163% y-o-y, while Ebitda margins nearly doubled to 27.5% on a y-o-y basis. Tata Steel’s standalone financials registered the highest-ever quarterly adjusted Ebitda at Rs 13,574 crore with 2.3x y-o-y growth. Tata Steel long products registered quarterly Ebitda of Rs 302 crore.

Revenues at Tata Steel Europe increased by 50% y-o-y to £2,108 million in Q2FY22. Ebitda improved 2.2x quarter-on-quarter to £328 million, which translates to an Ebitda per tonne of £153. The company’s gross debt decreased to Rs 78,163 crore with repayments of Rs 11,424 crore in the first half of the current financial year. The net debt declined to Rs 68,860 crore. Net debt to Ebitda improved to 1.21x and net debt to equity stood at 0.79x.

Consolidated free cash flow was Rs 3,322 crore during the quarter despite an increase in working capital of Rs 3,889 crore and dividend payment of Rs 3,020 crore. The company made a capital expenditure of Rs 2,191 crore during the quarter with ongoing work on the pellet plant, cold roll mill complex and the 5 MTPA expansion at Kalinganagar.

TV Narendran, chief executive officer & managing director, Tata Steel, said that the company’s strong quarterly performance comes on the back of improved results across key geographies and despite a seasonally weaker quarter. “We continue to drive value accretive growth in our chosen segments and our performance in key segments such as auto was very robust despite the sector being impacted by the semiconductor shortage. Our European operations have also delivered robust performance underpinned by strong improvement in realisations. We are watchful of the elevated coal prices and high energy cost as key risks to margins going forward”.

Koushik Chatterjee, executive director & chief financial officer, Tata Steel, said, “The operating cash flows continue to be strong despite working capital pressure due to price effect on coal price increase in recent months. We signed and closed the divestment of our 100% holding in NatSteel Holdings in this quarter to realise around Rs 1,200 crore that resulted in a realised gain of Rs 720 crore for the quarter”.

Chatterjee added that the company is targeting additional, aggressive deleveraging in the second half of the year as well. “The financial metrics of the company are now at investment grade levels and we are happy to note that the Standard & Poor has upgraded Tata Steel to investment grade level of BBB-,” he said.

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