Tata Steel shrugs off high raw material costs as Q3 net profit jumps 158%

Tata Steel Ltd reported a two-and-a-half times increase in consolidated net profit for the three months ended December 2021, defying a steep increase in raw material costs.

Profit for the fiscal third quarter surged 158% to Rs 9,572.67 crore from Rs 3,697.22 crore for the three months ended December 2020.

However, profit declined 19.67% from Rs 11,918.11 crore at the end of September 2021.

The company reported consolidated revenue from operations of Rs 60,524.72 crore last quarter compared with Rs 41,473.41 crore for October-December 2020 led by strong growth in domestic and European business.

On a sequential basis, revenue showed a growth of 0.95% from Rs 59,949.33 crore.

Other key highlights

1) Revenue from domestic business comprising Tata Steel India, Tata Steel Long Products, and other Indian operations grew 43% to Rs 39,438 crore.

2) Tata Steel Europe’s revenue grew 59% to Rs 22,768.76 crore.

3) Southeast Asian Operations reported an 11.2% year-on-year decline, and 36.2% fall quarter-on-quarter.

4) Cost of raw materials increased to Rs 20,546.54 in Q3 from Rs 12,243.98 crore a year earlier.

5) Consolidated EBITDA stood at Rs 15,853 crore, compared with Rs 17,810 crore in Q2 and Rs 8,394 crore a year earlier.

6) The company has spent Rs 2,790 crore on capex and forecasts an additional Rs 10,000-12,000 crore in capex spending for the current financial year.

7) It generated free cash flows of Rs 6,338 crore during the quarter.

Management commentary 

Tata Steel managing director and chief executive officer TV Narendran said that India’s steel sector has started to see an improvement on the back of continued economic recovery. The European operations continue to perform underpinned by strong improvement in realizations, he said.

“Our steel deliveries in India expanded by 4% in the first nine months of the financial year along with an improvement in product mix. We continue to drive value accretive growth in our chosen segments and our performance in key segments such as auto was robust despite the sector being impacted by the semiconductor shortage,” Narendran said.

Koushik Chatterjee, the company’s executive director and Chief Financial Officer, said that Tata Steel Long Products’ winning bid for Neelachal Ispat Nigam Ltd will enable the company to significantly ramp up its long products portfolio and benefit from the growth in infrastructure in India and retail housing growth in semi urban India.

“We will leverage our retail brands and pan India distribution network to drive scale, profitability and cash flows. The company posted strong operating cash flows in the quarter despite a significant surge in international coal prices and increased working capital requirements… The strong free cash flows were used to reduce the debt,” Chatterjee said.