Mumbai: Tata Steel turned the corner during the quarter ending 31 December aided by a stronger performance in its India unit even as its European business continued to haemorrhage capital.
The company reported a consolidated profit of ₹522 crore during the quarter compared to a loss of ₹2,502 crore in the corresponding quarter last year and ₹6,511 crore in the preceding quarter.
The recovery was primarily led by the domestic unit of Tata Steel, which reported a pre-tax, depreciation and interest profit of ₹8,257 crore compared to ₹5,335 crore last year. Meanwhile, Europe reported a loss of ₹2,872 crore before tax, depreciation, interest and exceptional items.
“The UK business continues to face production shortfalls arising from the end-of-life condition of several of its heavy end assets,” said Koushik Chatterjee, executive director and chief financial officer, Tata Steel.
Subdued demand weighed on the margins of the better performing Netherlands business too, he said.
While the company turned the corner during the quarter, T.V. Narendran, the chief executive and managing director of Tata Steel, maintained that the business environment was tough.
“Global operating environment has been complex, with economic slowdown in China and geopolitics weighing on commodity prices in general,” he said.
During the December quarter, China exported between 7 and 8 million tonnes of steel every month, he said, which is the highest since 2015. This, he claimed, has adversely impacted global steel prices as well as profitability.
“Despite this context, Tata Steel India has delivered better margins aided by higher deliveries as well as realisations on a QoQ basis,” he said.
On a consolidated basis, the company reported a top line of ₹55,312 crore. This was 3% lower year-on-year and less than a per cent lower sequentially.
“Among the key segments, automotive and well-established brands such as Tata Tiscon, Tata Steelium and Tata Astrum had best ever 3Q sales,” Narendran said.
Increased crude steel production in India—over 5 million tonnes in each of the three fiscal quarters so far—has helped the company consistently improve sales this year, Narendran said. This will only improve going forward as the company commissions 5 million tonnes per annum (MTPA) of new manufacturing capacity at its Kalinganagar steel mill, he said.
Better utilisation of assets has also aided the margins. Earnings before interest, tax, depreciation and amortisation (Ebitda) improved 55% year-on-year to ₹6,264 crore during the quarter. Ebitda margin widened over 4 percentage points to 11.3%.
The company’s ambitious merger scheme to simplify its business in India was largely complete with the merger of Tinplate Co. of India and Tata Metaliks into Tata Steel, Chatterjee said.
In the UK, the company has begun engineering design work on the electric arc furnace (EAF) that will replace its ageing blast furnaces. The company is targeting to commission the EAF by 2027.
Tata Steel’s board on Wednesday approved the issuance of over 99 million new shares in the ratio of 79 shares of Tata Steel for every 10 shares of Tata Metaliks for their merger. The record date for this will be 6 February. Tata Steel shares closed 3.88% higher on the BSE on Wednesday at ₹135.15.
The stock has gained over 13% in the last six months, outpacing the 7% gain in benchmark Sensex over this period. Tata Metaliks closed 3.78% higher at ₹1,059.25 on Wednesday.
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