Tata Steel Q2 net profit dips 50% to Rs 1,665 cr

Tata Steel reported 49.58% decline in consolidated net profit to Rs 1,665.07 crore on 7.4% increase in net sales to Rs 36,475.66 crore in Q2 FY21 over Q2 FY20.

On a consolidated basis, the company's steel production declined by 3.2% to 6.73 million tonnes and steel deliveries improved 13.3% to 7.40 million tonnes in Q2 September 2020 over Q2 September 2019.

The steel major reported a pre-tax profit of Rs 2,248.26 crore in Q2 September 2020 as compared to pre-tax loss of Rs 6.54 crore in Q2 September 2019. The company incurred a total tax expense of Rs 612.85 crore in Q2 FY21.

EBITDA rose by 59.7% to Rs 6,217 crore in Q2 FY21 from Rs 3,893 crore in Q2 FY20. EBITDA per ton improved by 40.8% to Rs 8,396 in the second quarter from Rs 5,963 in the same period last year.

Tata Steel said that all major sites in India operating close to full capacity utilization. The company's India business reported 23.4% fall in net profit from continuing operations to Rs 2,606 crore despite a 14.2% increase in turnover to Rs 23,067 crore in Q2 September 2020 over Q2 September 2019.

The company's India business reported 2% increase in steel production to 4.59 million tonnes while the deliveries jumped by 22.3% to 5.05 million tonnes in Q2 FY21 over Q2 FY20. EBITDA from India operations surged by 49.4% YoY to Rs.6,025 crore in Q2 FY21, driven by higher volumes, improved realizations and cost efficiencies.

The company said that the free cash flow generated during the quarter was Rs.7,832 crore. It further said that the company is committed to deleveraging of $1 billion annually and has reduced net debt by Rs 8,197 crore during the quarter.

The company has initiated discussions with SSAB Sweden based on interest received for the potential acquisition of Tata Steel's Netherland business including Ijmuiden steelworks. The company has also commenced discussions with the Supervisory Board and Board of Management of Tata Steel Netherlands and the process will move to the next stage including due diligence and stakeholders' consultations. The company is committed to deploy proceeds of any strategic restructuring towards additional deleveraging of the balance sheet, Tata Steel said in a statement.

The company has also initiated the process to separate Tata Steel Netherlands and Tata Steel UK and will pursue separate strategic paths for the Netherlands and UK business in the future.

Tata Steel is reorganizing its India footprint and folding listed and unlisted subsidiaries into four clusters to drive scale, synergies and simplification and to create value for all stakeholders. The business clusters are long products, downstream, mining and utilities & infrastructure.

On 13 November 2020, the boards of Tata Steel Long Products, Tata Metaliks and Indian Steel and Wire Products approved the merger of Tata Metaliks and Indian Steel and Wire Products into Tata Steel Long products. The proposed consolidation will create significant synergies and position the company towards future growth in the long products segment. We expect to complete the process in next 6-9 months, subject to necessary regulatory approvals, Tata Steel added.

T V Narendran, CEO & managing director: Tata Steel has delivered strong results in India with broad based, market leading volume growth and strong cashflow generation. The resilience of our business model and the commitment of our teams has enabled us to ramp-up capacity utilization to normal levels and achieve highest ever sales despite the ongoing challenges due to the COVID pandemic. There has also been a significant improvement in product mix towards domestic sales and higher value-added products and a sharp reduction in costs. We are now embarking on re-organizing our Indian subsidiaries into four verticals to drive scale, synergies and simplification which we are confident will create value for our stakeholders.

In Europe, though the overall environment remains challenging and recovery is more gradual, there has been an improvement in volumes and sales mix. We will continue to drive performance and work on a strategic resolution to ensure the focus remains on cash flows and self-sufficiency. We are continuing our discussions with the UK Government regarding the future strategy of our UK business.

Tata Steel group is among the top global steel companies with an annual crude steel capacity of 34 million tonnes per annum. It is one of the world's most geographically-diversified steel producers, with operations and commercial presence across the world.

Shares of the steel major were up 1.64% at 494.50 in the one-hour special Muhurat trading session on the occasion of Diwali on 14 November 2020.

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