Tata Steel Profit Jumps More Than Four-Fold On Asset Sales
Tata Steel Q1 profit jumps but falls short of estimates due to a one-time provision for mining related litigation.
Tata Steel Ltd.’s net profit jumped in the first quarter of the financial year 2017-18 due to strong operational performance and some exceptional items such as the sale of its investments in Tata Motors.
Net profit from continuing operations increased more than four-fold to Rs 933 crore from Rs 209 crore in the same quarter last year, the company said in an exchange filing on Monday. Profit jumped on account of sale of Tata Motors shares worth Rs 3,785 crore and strong operational performance.
One-Time Provision Weighs On Profitability
However, a one-time provision of Rs 617 crore mainly for mining related litigation and employee expenses weighed on profitability, Tata Steel said in its media statement
The provision of Rs 614.41 crore was toward a Supreme Court judgment in a matter related to production during FY00-01 to FY09-10, the statement added. The judgement directed that 100 percent of the notional value in excess of the limit specified by the environment clearance needs to be paid by miners.
Revenue increased 19 percent to Rs 29,557 crore, on a year-on-year basis on healthy volumes, the company said in an exchange filing on Monday. The consensus of analyst estimates tracked by Bloomberg stood at Rs 28,468 crore.
Our sales were up 28 percent on a year-on-year basis as the smooth ramp up of the Kalinganagar facility helped us increase our volumes and increase our market share.TV Narendran, Managing Director, Tata Steel (India and South East Asia)
Branded products and retail sales grew by 19 percent year-on-year and now comprise 48 percent of total sales.
Strong Operational Performance
Earnings before interest, tax, depreciation and amortisation rose 52 percent to Rs 4,974 crore on a year-on-year. EBITDA margins expanded to 17 percent from 13.2 percent in the same period.
EBITDA of European operations rose 63 percent to €152 million year-on-year due to improved market conditions but fell 36 percent sequentially due to higher raw material costs and lower volumes.
Meanwhile, EBITDA of Indian operations stood at Rs 2,922 crore compared to Rs 2,236 crore last year - an increase of 31 percent in line with higher sales volumes.
Volumes Decline Sequentially
Sales volumes declined sequentially as traders cut stock in the run-up to the implementation of the Goods and Services Tax regime. Consolidated volumes rose 8.56 percent year-on-year, but fell 15 percent quarter-on-quarter to 5.83 million tonnes, with the India business contributing to 47 percent of the total.
Sales for Indian operations stood at 2.75 million tonnes in the quarter, rising 28 percent on a year-on-year basis. Volumes of the European operations fell 3 percent on a year-on-year basis and 16 percent from the seasonally strong fourth quarter
Debt Burden
Tata Steel’s gross debt rose by Rs 4,798 crore to Rs 87,812 crore last quarter due to a foreign exchange impact, inventory build-up ahead of GST and seasonal trends in Europe, the media statement said.
The net debt was significantly lower at Rs 71,703 crore due to build up in cash reserves to fund the €550 payout as part of the British Steel Pensions settlement.
The company is in advanced discussions with the BSPS (British Steel Pension Scheme) trustee, the pension regulator and the pension protection fund and is hopeful of reaching a final agreement shortly, the statement added.
Other Highlights
- Realisations were under pressure during the quarter,
- Seeing a recovery in prices on stronger domestic demand and better international prices, management says.
- Steel prices in Europe have witnessed a marginal decline and this is expected to lead to lower spreads in the second quarter
- Appreciating rupee remains a cause for concern
Ahead of earnings, shares of the company closed 4.26 percent higher at Rs 600 on the BSE.
