Tata Steel Q4 Results: Profit Surges 80% On Higher Sales, Prices
Employees stand on a train loaded with steel coils at the steel works operated by Tata Steel Ltd. in Port Talbot, U.K. (Photographer: Chris Ratcliffe/Bloomberg)

Tata Steel Q4 Results: Profit Surges 80% On Higher Sales, Prices

Tata Steel Ltd.’s fourth-quarter profit surged on higher sales and prices.

The steelmaker’s consolidated net profit rose 79.7% over the preceding quarter to Rs 6,644 crore in the three months through March, the steelmaker said in its exchange filing. That, however, was below the Rs 7,422-crore consensus estimate of analysts tracked by Bloomberg.

While the bottom line missed estimates, operating performance surpassed estimates.

Operating profit rose 48% sequentially to Rs 14,184 crore, the company said, as realisations rose for the steelmaker’s key entities. Ebitda is the highest in at least 20 quarters, surpassing the forecast of Rs 12,820 crore.

Revenue rose 19% sequentially to Rs 49,977 crore, driven by rising domestic sales and higher prices of hot-rolled coil steel. Analysts had estimated Rs 46,105 crore.

Hot-rolled coil prices rose 16.7% sequentially to Rs 54,856 per tonne in the fourth quarter, according to Edelweiss Securities.

Tata Steel’s consolidated sales volumes rose 0.43% quarter-on-quarter to 4.67 million tonnes. The company attributed the growth to a robust marketing network and improved market conditions.

“First half of financial year 2021 was a challenging period with the uncertainties and complexities brought on by the Covid-19 pandemic," T V Narendran, chief executive officer and managing director at Tata Steel, said in the statement. "Despite a slow start in first quarter (due to Covid-19), we managed to deliver strong performance in India with broad-based, market-leading volume growth supported by our agile business model.”

All segments, especially automotive, performed extremely well due to continuous focus on building strong customer relationships, superior distribution network, brands, and new product developments, he said. “Work on the pellet plant and CRM complex at Kalinganagar is progressing well. We have also restarted our 5 MTPA expansion project which should be completed in FY24.”

Debt Reduction

  • FY21 net debt stood at Rs 75,389 crore; 28% lower than the previous fiscal.

  • Tata Steel reduced gross debt by more than Rs 20,000 crore in Q4FY21.

  • The steelmaker pared debt by Rs 28,000 crore in FY21.

Shares of Tata Steel closed 0.59% higher on Wednesday ahead of the earnings announcement, tracking the 0.84 rise in Nifty 50.

Standalone Performance

  • Net profit rose 82.4% sequentially to Rs 6,593.5 crore—higher the Rs 6,175.8-crore consensus estimate of analysts tracked by Bloomberg.

  • Operating profit rose 37.1% quarter-on-quarter to Rs 9,187.8 crore—higher than the Rs 7,973-crore estimate.

  • Unitary operational performance, expressed in terms of Ebitda per tonne, rose 37.9% quarter-on-quarter to Rs 27,828.

European Unit

  • Operating profit stood at Rs 1,194 crore compared to a Rs 724-crore loss in the last quarter. That was driven by higher deliveries and strong steel prices in the European division, according to the exchange filing.

  • Steel deliveries in the European region rose 17% sequentially in the fourth quarter. Ebitda per tonne stood at Rs 4,841 compared to a loss of Rs 3,438 per tonne in the previous quarter.

Concall Highlights

  • To continue to focus on deleveraging and building up on growth.

  • Earmarked capex of Rs 23,000 crore for 5-MTPA expansion laid out for next three years, that is FY24. Of this, Rs 7,000-8,000 crore have already been spent.

  • Earmarked capex of Rs 11,000 crore for FY22 , which includes Rs 7,500 crore for India.

  • Targets long-term debt to Ebitda target to be at 2.5x.

  • Reclassified South East Asia operations as continuing due to lack of appropriate offers.

  • Have stopped but not completely closed the evaluation process for South East Asia division.

  • Expects spreads for auto-contracts to go higher by 70 euros in the Netherlands and £40 in the U.K. on sequential basis in Q1.

  • A total of £12/ tonne surcharge of carbon credit tax has been levied on customers in Europe. This has been included in overall price hike undertaken in the region.

  • Would be interested to pursue inorganic opportunities for long products.

  • Cost advantages of cold rolled coil mill and pellet plant commissioning should help with margin and revenue enhancement for FY22.

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