Tata Steel expects a multi-fold increase in net profit in the second quarter, with a total of Rs 11,918 crore

For the second quarter ended September 30, 2021, Tata Steel reported a combined net profit of Rs 11,918 crore (Q2FY22). This is up 661 percent over the same quarter last year when revenue was 1,565 crore.

Revenue from operations for the steel major increased by 55 percent to 60,282 crores in the quarter under review, compared to 38,939 crores the year before.

Tata Steel shares closed flat on the NSE on Thursday, ahead of the results, at $1,299 per share. The stock has gained 102.15 percent (year-to-date) and 174.75 percent in the previous year since the start of 2021.

“In this seasonally lower quarter, Tata Steel has generated good results across key markets. Despite a drop in market demand, our steel deliveries in India increased by 11%, demonstrating the resilience of our franchise. T V Narendran, CEO and MD of Tata Steel, stated, “We continue to drive value accretive growth in our chosen categories, and our performance in important segments such as auto was quite robust despite the sector being hampered by the semiconductor shortage.”

The company’s consolidated adjusted EBITDA (profits before interest, taxes, depreciation, and amortization) climbed by 12% to Rs 17,810 crore in the June quarter.

During the second quarter, crude steel output climbed by 3% year over year to 4.73 million tonnes, while overall deliveries increased by 11% QoQ to 4.58 million tonnes, despite market demand reduction due to seasonal slowdown.

The India business’s adjusted EBITDA for the quarter was Rs 13,877 crore, up 2.3x year on year.

In the reporting quarter, revenue at Tata Steel Europe increased 50% year on year to £2,108 million, while EBITDA increased 2.2x QoQ to £328 million, translating to an EBITDA per tonne of £153.

“Despite working capital constraint caused by the recent increase in coal prices, operating cash flows have remained healthy. In this quarter, we signed and finalized the sale of our whole stake in NatSteel Holdings for roughly 1,200 crores, resulting in a realized gain of 720 crores for the company “quarter,” stated Tata Steel’s Executive Director and CFO, Koushik Chatterjee.

“As part of our enterprise strategy, we continue to use free cash flows to de-leverage the balance sheet, with debt repayments of Rs 11,424 crore in the first half of this fiscal year and plans for more aggressive deleveraging in the second half,” Chatterjee added.

Tata Steel is one of the world’s largest steel producers, having an annual steel production capacity of 34 million tonnes.

Other operational features from Tata Steel’s second-quarter results

– Despite an increase in working capital of 3,889 crores and a dividend payment of 3,020 crores, consolidated free cash flow was 3,322 crore in 2QFY22.

– During the quarter, the business invested Rs 2,191 crore on capital, with construction on the Pellet plant, Cold Roll Mill complex, and Kalinganagar’s 5 MTPA expansion still ongoing.

– Meanwhile, gross debt fell to 78,163 crores in the first half, thanks to repayments of 11,424 crores, while net debt fell to 68,860 crores.

– The ratio of net debt to EBITDA has improved to 1.21x, while the ratio of net debt to equity has decreased to 0.79x.

– Tata Steel’s standalone business reported the highest quarterly adjusted EBITDA ever in the second quarter, at Rs 13,574 crore, up 2.3 times year on year.

– Tata Steel Long Products reported a 302 crore quarterly EBITDA.