Q4 Results: Tata Steel Beats Estimates As Record Output Offsets Subdued Prices

Tata Steel Ltd.’s profit in the January-March quarter beat analyst estimates after its domestic steel output rose to a record last fiscal due to acquisitions and capacity ramp-up.

Net profit fell 76 percent over last year to Rs 2,431 crore, according to stock exchange filings. Analysts tracked by Bloomberg had expected profit at Rs 2,194.6 crore. Profit was expected to fall as Tata Steel had seen a one-time gain of Rs 11,376 crore in the comparable quarter.

• Revenue rose 25.9 percent to Rs 42,424 crore.
• Adjusted operating profit (excluding Bhushan Steel Ltd. merger) rose 33 percent to Rs 7,814 crore.
• Margin narrowed 130 basis points to 17.7 percent.

Tata Steel has shifted its focus on its Indian unit after divesting stake in its foreign businesses. The acquisition of Bhushan Steel last year—it’s biggest since U.K.'s Corus Plc in 2013—and the ramp-up at its Kalinganagar unit has helped it increase steel production domestically. In 2018-19, Tata Steel’s consolidated production rose 35 percent to a record 16.79 million, with Bhushan Steel contributing a fourth of that. Yet, on a standalone basis, Tata Steel’s volume growth as the slowest in at least four years.

“Tata Steel continues to grow its footprint in India in terms of volumes, downstream capability and product portfolio,” Chief Executive and Managing Director TV Narendran said in the statement. “Despite subdued steel markets and weak growth in our key customer segments, this year our volumes in India grew by over 33 percent leading to a significant improvement in our overall profitability and cashflows.”

The board of directors have proposed a merger of Tata Steel with Tata Steel BSL to reduce regulatory burden, simplify the group structure and improve efficiency. They recommended a merger ratio of 15 shares of Tata Steel BSL for every one share of Tata Steel.

The board has also recommended a dividend of Rs 13 per share.

Key Highlights:

• Ebitda/tonne went up 5 percent to Rs 10,838. That beats the analyst estimate of Rs 9,348.
• Consolidated volume grew 26.5 percent to 7.21 million tonnes during the quarter.
• Tata Steel reduced gross debt by 8,781 crore in the quarter. It will further target reducing gross debt by another $1 billion by the end of 2019-20.
• Company working closely to secure regulatory approvals for their European joint venture with Thyssenkrupp.