Tata Steel reports higher-than-expected net profit of Rs 2,431 crore for Q4

Company recommends merger ratio of 15 shares of Tata Steel BSL for every 1 share of Tata Steel

Tata Steel, the country’s oldest steel producer, on Wednesday reported a higher-than-expected consolidated net profit of Rs 2,430.92 crore for the March 2019 quarter, on revenue of Rs 41,186 crore. 
 
According to Bloomberg estimates, consolidated revenue was seen at Rs 43,725 crore and net profit at Rs 2,194 crore for the quarter.
 
The results are not comparable with the March 2018 quarter, on account of an exceptional item that had resulted in a net profit of Rs 10,152.99 crore. This was largely due to a non-cash gain on account of the restructuring of the UK pension scheme.
In the period under review, top line grew 26 per cent year-on-year (YoY) on the back of a 29 per cent increase in volumes, even as realisations remained little changed.
 
Consolidated adjusted Ebitda (earnings before interest, taxes, depreciation, and amortisation) in the January-March period increased by 33 per cent on a YoY basis to Rs 7,814 crore. For the full year, Tata Steel reported net profit of Rs 10,363 crore on revenue of Rs 1.55 trillion. “Despite subdued steel markets and weak growth in our key customer segments, our volumes in India grew over 33 per cent this year, leading to significant improvement in our overall profitability and cash flows,” said T V Narendran, CEO and managing director of Tata Steel.

 
“Tata Steel reported one of the highest ever consolidated adjusted Ebitda, with record growth of 55 per cent YoY at Rs 30,734 crore, and 27 per cent YoY increase in revenues during FY19,” said Koushik Chatterjee, executive director and chief financial officer.
Tata Steel also announced a merger with Tata Steel BSL (earlier Bhushan Steel), which it acquired during the insolvency proceedings. The board has recommended a merger ratio of 15 shares of Tata Steel BSL for one share of Tata Steel, subject to shareholders’ nod and other regulatory approvals.
 
The management said the merger will drive operational synergies and efficiencies, reduce the regulatory burden, and simplify the group structure. Tata Steel BSL is focusing on ramping up production and realising synergies.
 

“Tata Steel continues to grow its footprint in India in terms of volumes, downstream capability and product portfolio. Our strategy of focusing on operational excellence, strong customer relationships, superior distribution network and brands is paying rich dividend,” the company said.
 
Tata Steel and Thyssenkrupp AG are working together to secure the required regulatory approval for the proposed 50:50 joint venture in Europe. The European Commission has issued its ‘Statement of Objection’, for which both Tata Steel and Thyssenkrupp recently submitted a comprehensive package of proposed remedies.

 
In India, the Tata Steel Kalinganagar Phase II expansion project is progressing well and is on track for completion in FY22, said Tata Steel. In addition, the acquisition process of Usha Martin’s steel business through Tata Sponge Iron was recently completed for a cash consideration of Rs 4,094 crore.
 
Tata Steel sees the pressure on raw material prices continuing, which may push up steel product prices by an average Rs 1,500 per tonne in the April-June quarter, compared to the March quarter.

On the debt front, the company said it has deleveraged its balance sheet by Rs 18,000 crore in FY19, thus bringing its consolidated net debt to Rs 1 trillion. Tata Steel has extended its debt maturity profile by raising Rs 4,315 crore through 15-year non-convertible debentures, while Tata Steel BSL has completed its capital restructuring and has refinanced its short-term debt into long-term loan.