Tata Steel slides as Q2 profit rises on tax writeback

On consolidated basis, the steel major reported a 6% rise in net profit to Rs 3,302.31 crore on the back of one time deferred tax gain of Rs 4365.33 crore in Q2 September 2019.

Tata Steel reported its Q2 earnings after market hours yesterday, 6 November 2019.

Adjusted profit after extra-ordinary item fell 10.88% to Rs 3,123.65 crore in Q2 September 2019 over Q2 September 2018. Net sales fell 15.77% to Rs 33,953.75 crore during the period under review. Adjusted EBITDA dropped 46% to Rs 3817 crore on YoY basis.

The company had a favorable tax impact of Rs 4,233 crore of which Rs 2,425 crore was on adoption of the new corporate tax rate by Tata Steel Standalone and some subsidiaries in India and Rs 1,808 crore was on account of recognition/reversal of deferred tax assets and liabilities in offshore subsidiaries.

The company's steel production for India rose marginally from 4.3 million tonne in Q2 September 2018 to 4.5 million tonne in Q2 September 2019. The deliveries of steel declined to 4.13 million tonne in Q2 2019 as against 4.32 million tonne in Q2 2018.

Tata Steel reported a tough quarter in global market. During the quarter, the economic growth across geographies slowed down as trade frictions outweighed accommodative monetary policies. The steel prices declined by more than $100/ton in key geographies amidst weak demand over the course of one year.

In India, despite the slowdown, the company was able to successfully maintain its sales volumes in branded products & retail segment and industrial product & projects segment. The sharp slowdown in the automotive sector, particularly in the commercial vehicle segment, was offset by higher exports.

Commenting on company's Q2 2019 performance, T.V Narendran, CEO & MD said, "The business environment in India and other geographies continued to be challenging and weighed heavily on steel prices. Tata Steel worked closely with customers across business segments to drive sales and maintain volumes. We are focused on driving productivity improvements across our various operations as well as the supply chain to reduce costs and minimize the impact on margins.

Gross debt during the quarter was Rs 1,11,549 crore. Net debt stood at Rs 1,06,952 crore.

Global steel demand is expected to remain weak due to broader economic slowdown and increasing trade barriers. India steel demand is expected to improve in 2HFY20 with the end of monsoon, increase in the government spending and improvement in liquidity. Steel demand in European Union is expected to decline by 0.6% in CY19 due to sustained weakness in key steel consuming sectors, the company said.

Shares of Tata Steel were down 2.5% at Rs 394.25. Meanwhile the NSE Nifty 50 index was trading 0.26% higher at Rs 11,997.70.

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