Tata Steel Q2 Results: Profit Drops 63% Even As India Business Recovers
Steel works operated by Tata Steel in U.K. (Photographer: Chris Ratcliffe/Bloomberg)

Tata Steel Q2 Results: Profit Drops 63% Even As India Business Recovers

Tata Steel Ltd. saw its quarterly profit tank due to losses at overseas subsidiaries, even as the India business improved significantly.

Consolidated net profit fell 62.7% year-on-year to Rs 1,546.3 crore in the quarter ended September, according to its exchange filing. Analysts’ estimates compiled by Bloomberg had pegged profit at Rs 29 crore.

Tata Steel Q2 Results: Key Highlights (year-on-year)

  • Revenue rose 7.4% year-on-year to Rs 37,153.9 crore—higher than the estimated Rs 34,147.2 crore.

  • Operating profit rose 60% to Rs 6,110.7 crore.

  • Operating margin improved to 16.4% from 11% earlier.

  • Tata Steel in talks to sell its Netherlands business to SSAB Sweden.

  • Company has also approved an internal restructuring of listed and unlisted Indian units.

Tata Steel To Separate Its European Units

Tata Steel’s cash-draining European business, which it has been looking to hive off for a while now, continued to add to the steelmaker’s woes. Weak demand and global overcapacity coupled with high iron ore prices put European steelmakers under pressure. Sales volume for Tata Steel Europe remained largely flat despite benefitting from lower coking coal costs.

The steelmaker is now in talks with SSAB Sweden to sell off its Tata Steel Netherlands business, it said in a statement. The company is also in the process of separating Tata Steel Netherlands and Tata Steel U.K. to pursue separate strategic paths for the two businesses.

“Based on the discussions, initiated by SSAB Sweden, regarding a potential acquisition of Tata Steel’s Netherlands business, we will undertake a due process and move to the next stages including consultation and due diligence,” Executive Director and Chief Financial Officer Koushik Chatterjee was quoted as saying in the statement.

Best-Ever Quarterly Sales In India

Domestically, though, things were very different. Production has recovered since the Covid-19-induced lockdown with steel mills in India now firing on all cylinders. Tata Steel’s domestic sales volumes rose 22% year-on-year to 5.05 million tonnes—it’s highest-ever quarterly figure.

Improved realisation, lower coal prices and relatively fewer exports helped Tata Steel improve its operational profit. Besides, prices of hot-rolled coil steel increased by 4.2% to Rs 39,404 per tonne during the quarter, aiding its earnings.

“The resilience of our business model and the commitment of our teams has enabled us to ramp-up capacity utilisation to normal levels and achieve highest ever sales despite the ongoing challenges due to the Covid pandemic,” Chief Executive Officer and Managing Director TV Narendran was quoted as saying in the statement. “There has also been a significant improvement in product mix towards domestic sales and higher value-added products and a sharp reduction in costs.”

Indian Subsidiaries To Be Restructured

In India too, Tata Steel will pursue simplification of its structure by clubbing its listed and unlisted subsidiaries in four clusters to improve efficiency, the statement said. The respective boards of the subsidiaries have approved a merger of Tata Metaliks Ltd. and Indian Steel and Wire Products Ltd. into Tata Steel Long Products Ltd. The merger is expected to be completed in the next 6-9 months.

Shares of Tata Steel closed 2.82% higher ahead of the quarterly results, while the benchmark BSE Sensex ended 0.2% up.

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