Tata Steel on Thursday managed to outdo street expectations on earnings as it reported a consolidated net profit of R1,545.2 crore in the July-September quarter, thanks to higher other income through sales of non-core assets. A more than than 20% jump in earnings over the same period last year was also supported by lower finance and tax expenses which collectively declined by 46%.
Consolidated revenue of the steel major declined 18% y-o-y to R29,068.5 crore on account of weak demand environment.
At R2,938 crore, other income witnessed a more than nine-fold y-o-y jump mainly due to monetisation of company’s stake in group companies Titan and Tata Motors. During the quarter, Tata Steel sold R3,200 crore of non-core assets.
Bloomberg consensus estimate pegged Tata Steel to report sales of R30,033 crore, ebitda of R2,426 crore and a net loss of R95.9 crore for the second quarter of fiscal 2015-16, on the consolidated level.
While the company reported 9% y-o-y increase in deliveries to 2.33 million tonnes in the domestic operations, realisations remained under pressure due to muted manufacturing activity as well as stronger rupee. The consolidated underlying EBITDA per tonne for Q2FY16 stood at R1,985 compared to R3,997 in the same quarter last year.
“The underlying EBITDA was impacted by operational looses for some of the UK businesses and lower profitability of Indian operations,”said Koushik Chatterjee, group executive director and chief financial officer, Tata Steel. He added that higher consumption of consumed iron ore and palates also impacted India business.
Tata Steel said that its Noamundi mine in Jharkhand which stopped dispatches in July this year, started deliveries since September 29. The shut-down had an impact of R300 crore on the raw material cost.
The management indicated that demand in core infra and construction sector was subdued also as rural demand remained soft due to drought conditions in several pockets. According to T V Narendran, while imposition of safe guard duty arrested decline in domestic prices, relatively higher price spread of Japan and Korean imports to that of China lead to jump in imports from the former two countries.
“Domestic price environment witnessed an impact of tactical pricing by producers that carry higher inventories.
While market realisations declined 8% q-o-q, Tata Steel reported a 6% sequential fall,” added Narendran.
The European business, particularly UK operations remained a drag on the consolidated performance. The company reported EBITDA loss of 25 million pound compared to profit of 84 million pound in the previous quarter.