Tata Steel sees net profit decline 13% in Q1, but beats expectations

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    NEW DELHI : Tata Steel reported a 13% decline in quarterly profit but managed to comfortably top analysts’ estimates on better-than-expected price realizations in India and improved profitability in Europe.

    Net profit rose to 7,714 crore in the three months ended 30 June from 8,900 crore in the year earlier, the Mumbai-based steelmaker said. That compared with the 7,380 crore consensus estimate in a Bloomberg survey. Sales rose 19% to 63,430 crore, and costs rose 25% to 51,910 crore.

    Standalone net profit fell 31% from a year ago to 6,114.17 crore but beat analysts’ estimates of 4,880 crore.

    The profitability of its European operations saw a sharp increase, although sales volume fell.

    Kamlesh Bagmar, deputy head of research at Prabhudas Lilladher, said that Tata Steel’s performance was boosted by stronger-than-expected realizations in India and elevated margins in Tata Steel Europe.

    However, the imposition of export duty on steel, rising raw material costs and drop in steel prices globally hurt the company’s performance.

    “This has been a challenging quarter for the global and Indian economy, with rising interest rates, supply chain constraints and a slowdown in China due to covid. Despite these multiple headwinds, Tata Steel has delivered a strong performance with an improvement in margins,” said T.V. Narendran, chief executive and managing director of Tata Steel.

    The higher raw material prices crimped the profitability of its domestic operations. As a result, the company’s standalone operating profit for India operations fell 31% to 9,582 crore from a year earlier and 23.6% from the preceding March quarter.

    For its India operations, Ebitda per tonne fell to 23,557 from 24,469 in the preceding three months and 33,568 in the year-ago quarter.

    In rupee terms, Ebitda per tonne of 28,220 clocked in the European operations was much better than 18,135 in the previous quarter and 6,590 in the year-ago quarter.

    Consolidated Ebitda at 15,047 crore was not much lower than 15,174 crore in the preceding three months, though down from 16,185 crore in the year-ago quarter.

    Revenue per tonne rose by 8,534 sequentially to 83,625 per tonne due to long-term contracts and a better product mix, the company said.

    The company said its expansion projects are progressing well, with the 6 million tonnes per annum (mtpa) pellet plant at Kalinganagar set to be commissioned in the third quarter, followed by the cold roll mill complex.

    “We spent 2,725 crore on capital expenditure, in line with our annual capex guidance as we progress on our Kalinganagar expansion. The volatility in commodity prices and immediate impact of the export duty in India have led to an increase in working capital, but our cost improvement and other initiatives, along with the expected pickup in demand in the second half of the year, should result in normalization of working capital,” said Koushik Chatterjee, executive director and chief financial officer.

    Despite significant working capital pressures, net debt stood at 54,504 crore, and the company’sfinancial metrics remain strong, Chatterjee added.

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