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Indian steelmaker Tata Steel today reported its financials for the Q1 FY22 to SEBI with a more than 100% y-o-y increase in consolidated net profit at Rs 9,768.34 crore.

The company beat market estimates and recorded a revenue of Rs 52,300 in Q1 FY22 with strong market financials and buoyant market conditions. Let’s highlight here that Tata Steel led India’s fight against Coronavirus from the front by producing more than 68,600 tons of Liquid Medical Oxygen when the country was reeling under the second wave.

India’s largest steel producer is also focusing on the expansion of its 5 MTPA Kalinganagar plant. In its report, the company said that Tata Steel’s prices are at a steep discount in comparison to the Chinese prices despite the Chinese mills’ profitability declining. While the steel demand tumbled in India amid the second wave of COVID, the European arm of the company recovered significantly. European steel prices continue to remain high due to a return to normalcy- a factor that boosted Tata Steel’s Europe business.

Tata Steel’s stock prices closed at Rs 1,433.65 after a gain of 0.52% ahead of the release of its financials.

Hits

  • Consolidated net profit grew by over 110% from Rs 4,648.13 crore to Rs 9,768.34 crore y-o-y.
  • Profit after tax advances by more than 36% from Rs 7,161.91 crore q-o-q to Rs 4,648.13 crore.
  • Consolidated EBITDA increased more than 25.7 times y-o-y to Rs 16,185 crore.
  • Tata Steel reported a free cash flow of Rs 3,553 crore in the June 2021 quarter.
  • With debt repayment of Rs 5,894 crore, the company’s net debt declined to Rs 73,973 crore.
  • Revenue from operations doubled to Rs 53,371 crore from Rs 25,474 crore y-o-y.
  • Crude steel production hiked by 54.8% y-o-y

Misses

  • The company’s other income went down from Rs 272.18 crore to Rs 162.23 crore q-o-q.
  • Crude steel production declined 2.6% q-o-q after Tata Steel began production of medical-grade liquid oxygen amid the second wave of the COVID-19 pandemic.

Segment-wise revenue 

Tata Steel Europe: Revenue up from Rs 11,225.46 crore to Rs 19,441.01 crore y-o-y.

Tata Steel India: Revenue up from Rs 9,338.78 crore to Rs 20,798.31 crore y-o-y.

Tata Steel Long Products: Revenue up from Rs 653.10 crore to Rs 1,687.64 crore y-o-y.

Bamnipal Steel: Revenue up from Rs 2,697 crore to Rs 7,858.28 crore y-o-y.

South-East Asian operations: Revenue up from Rs 1,622.40 crore to Rs 3,411.95 crore y-o-y.

Tata Steel – Company statement

With the Indian economy hit by the deadly second COVID-19 wave, Tata Steel’s production and delivery of steel have been adversely impacted throughout Q1 FY22. “Demand has begun recovering in India, though domestic steel prices continue to be at a steep discount to China import parity prices. 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 & solutions in steel and new materials”, said Tata Steels CEO & MD T V Narendran.

Tata Steels also generated a consolidated free cash flow of Rs 3,500 crore and made debt repayments of Rs 5,894 crore in this quarter. “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”, said Tata Steel Executive Director & CFO Koushik Chatterjee.

What does this mean for the investor?

Tata Steel maintains a constructive business outlook and highlights the recovery in the global economy. The company foresees a spike in global steel demand and expects the European business to remain strong. However, the rising steel prices and a potential increase in the prices of raw materials could spell trouble for the steel-producing industry.

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