Long lengths of red hot steel pass through a machine in a foundry at a steel plant. (Photographer: Oliver Bunic/Bloomberg)

Q2 Results: Tata Steel’s Profit Jumps On Bhushan Steel Inclusion And One-Time Profit

Tata Steel Ltd.’s profit for the September-ended quarter surpassed estimates owing to the inclusion of Bhushan Steel and its financials into its books.

Net profit for the quarter stood at Rs 3,604.2 crore compared with last year’s Rs 976 crore—above the Bloomberg consensus estimate of Rs 2,483 crore. The results of the quarter are not comparable on a yearly basis owing to the inclusion of Bhushan Steel’s numbers.

The company also reported an exceptional gain of Rs 163.7 crore versus a Rs 44.65 crore loss in the year-ago period. Exceptional gain worth Rs 130 crore was attributed to liabilities that needn't be written back. Gains also stem from the sale of subsidiaries in joint venture in relation to its European operations

Revenue rose 34.1 percent to Rs 43,544.1 crore on a yearly basis. Analysts tracked by Bloomberg projected the figure at Rs 40,806 crore. The company’s volume rose 15 percent year-on-year to 7.42 million tonnes in the quarter. Tata Steel’s standalone deliveries along with Bhushan Steel’s output stood at 4.32 MT in the July-September period.

“This quarter, despite a seasonally weaker period, we sold 4.32 million tonnes across Tata Steel Standalone and Bhushan Steel,” Tata Steel’s Chief Executive Officer and Managing Director TV Narendran said in a statement. “This demonstrates our strong customer relationships and the strength of our marketing franchise.”

Soaring Ebitda

Earnings before interest, tax, depreciation and amortisation rose 89 percent year-on-year to Rs 8,920 crore. Operating margin expanded 600 basis points to 20.5 percent.

Tata Steel said in its annual report that it expects to sustain its Ebitda per tonne performance in the first half of the financial year. The company’s consolidated Ebitda per tonne stood at Rs 12,131 and standalone Ebitda/tonne stood at Rs 19,244 for the quarter under review.

Key Highlights:

  • Consolidated volume up 15 percent to 7.4 million tonnes.
  • Consolidated Ebitda/tonne at Rs 12,131.
  • Gross debt increased by Rs 2,065 crore in the quarter.

The stock gained 2.38 percent in the quarter and closed today at Rs 589 apiece, up by nearly 1.53 percent, ahead of the earnings announcement.

The company’s joint venture with German steel giant Thyssenkrupp AG invited a probe by the European Commission with respect to “certain specialty flat carbon steel and electrical steel products” in October. The company clarified at a conference today they were making good progress on the joint venture and that they were in talks with the commission for the phase II review, which typically takes 90 days.

The Mumbai-headquartered steel maker announced in September the acquisition of Usha Martin Ltd.’s steel business for Rs 4,300-4,700 crore. It roped in Tata Steel Sponge Iron Ltd. in October to seal the deal. According to the press release attached with the exchange filing, Tata Steel—which will financially support Tata Sponge in the rights issue that will be used for the acquisition—had obtained shareholder approval on Monday. “As far as Usha Martin is concerned, there are issues within the promoters and it is for them to resolve,” Narendran said at the conference.