Tata Steel reports Q1 profit at Rs 9,768 cr; sales more than double

Even though the demand is seen recovering in India, domestic steel prices continue to be at a steep discount to China import parity prices, says CEO Narendran

Tata Steel posted a strong set of numbers for the June quarter, beating estimates despite the impact of second coronavirus wave.

One of the top performer in the Nifty50 pack, Tata Steel reported a consolidated net profit of Rs 9,768 crore in the first quarter (Q1FY22). The company had posted a loss of Rs 4,648 crore in the year-ago period.

Sequentially, the profit after tax, rose 36 per cent from Rs 7,161 crore in the March quarter.

According to a consensus Bloomberg estimate, Tata Steel was expected to report a record profit of over Rs 9,000 crore, while the revenue was seen at Rs 52,300 crore for the June quarter.

India's leading steel maker's revenue from operations more than doubled to Rs 53,371 crore from Rs 25,474 crore in the last year period.

Tata Steel's shares have rallied as much as 117 per cent this year. The scrip, ahead of results, rose 0.52 per cent to Rs 1,433.6 on NSE.

"Indian markets were adversely impacted again during the last quarter due to the second wave of coronavirus which impacted our steel production as well as deliveries," said T V Narendran, Chief Executive Officer and Managing Director, Tata Steel.

Narendran said even though the demand is seen recovering in India, domestic steel prices continue to be at a steep discount to China import parity prices

Tata Steel has reported its highest ever quarterly consolidated earnings before interest, taxes, depreciation and amortisation (EBITDA) at Rs 16,185 crore during the reporting quarter. The India business EBITDA came in at Rs 13,946 crore, again its highest ever.

"We continue to focus on our objective to attain and retain market leadership in chosen segments by building strong customer relationships, superior distribution network, rolling out brands and developing new products and solutions in steel and new materials," Narendran said.

During the quarter, the company spent Rs 2,011 crore on capex; work on the pellet plant, the Cold Roll Mill complex and the 5 MTPA expansion at Kalinganagar is ongoing, said Tatas Steel in an exchange filing.

Gross debt decreased to Rs 84,237 crore with debt repayment of Rs 5,894 crore at the end of the quarter, while net debt of the company fell to Rs 73,973 crore.

Despite the increase in working capital due to higher prices of both steel and raw material, the company said it generated consolidated free cash flow of over Rs 3,500 crore during this quarter and made debt repayments of Rs 5,894 crore. 

"We are committed to deleverage further and expect to bring down the debt significantly by the end of the current financial year. We continue to prioritize capex spend on ongoing projects and strategically essential investments," the chief financial officer Koushik Chatterjee said.

In the India operations, Crude steel production surged by 55 per cent over last year, but dipped 2.6 per cent to 4.63 million tonnes on a sequential basis.  

Overall deliveries rose 42 per cent year-on-year, but partial lockdowns dragged them 11 per cent lower to 4.15 million tonnes when compared with previous quarter. Meanwhile, Steel deliveries at Europe business jumped by 17.4 per cent year-on-year to 2.33 million tonnes.

Compensating for the softness in domestic demand, exports increased to 16 per cent of the total sales in the first quarter.