Tata Steel is back into the black with a consolidated net profit of Rs 7,162 crore for the quarter ended March 31, 2021 versus a net loss of Rs 1,615 crore in the corresponding quarter last year. However, the net profit was slightly below Bloomberg consensus estimates of Rs 7,421 crore.
The company’s consolidated revenues increased 39% on a year-on-year basis to Rs 49,977 crore, which was much above analysts estimates of Rs 46,105 crore. The consolidated Ebitda (earnings before interest, tax, depreciation and amortisation), which was the highest ever, increased two-fold y-o-y to Rs 14,290 crore. Consequently the company’s Ebitda margins came in at 28.6%, up a steep 1520 basis points. The company’s Ebitda per tonne on a consolidated basis increased to Rs 18,253 versus Rs 6,838 in January-March 2020.
On a consolidated basis, the company reported an increase of 11% in the steel deliveries on a year-on-year basis. India steel deliveries grew 16% y-o-y to 4.67 million tonne in 4QFY21. The company also achieved highest ever quarterly crude steel production in India of 4.75 million tonne during the quarter.
Commenting on the outlook on demand and any impact on production given the ban on use of oxygen for industrial purposes, TV Narendran, CEO and managing director, Tata Steel, said there is an impact being seen on small and medium enterprises and fabrication sector, which are primary users of the gas. “There could be an impact on the fabrication business, there could be an impact on other areas like welding and cutting. We are also seeing some signs of activity slowing down in the construction sector, but that is largely got to do with the migrant workers problem and activity slowing in fabrication units,” he said.
However, Narendran clarified that the ban on oxygen will not impact company’s production. “Demand side will see a greater impact than the production side,” he added.
Commenting on the financial performance, he said, “All our segments, especially automotive, have performed extremely well due to our continuous focus on building strong customer relationships, superior distribution network, brands, and new product developments. We are also making good progress on our various initiatives to de-risk the business while our digital marketing platforms are helping us reach new markets and be future ready. The second wave of Covid-19 in India is a risk and we are working to minimize the impact on our employees and communities while meeting the requirements of our customers”.
Koushik Chatterjee, executive director and chief financial officer, Tata Steel, said that with disciplined capital allocation and tight working capital management through the year, Tata Steel’s full year free cash flow after capex was around Rs 24,000 crore. “In the current financial year, we will reduce the debt levels by more than a billion dollars and also enhance the capital allocation to our strategic capex programme in India to complete the 5MTPA expansion in Kalinganagar,” he said.
Tata Steel’s reduced its gross debt by over Rs 20,000 crore during the quarter and full year de-leveraging was about Rs 28,000 crore. As a result, the year-end net debt was Rs 75,389 crore which is 28% lower compared to the previous year end. Chatterjee said that the aggressive prepayment of debt has resulted in a sharp improvement of the capital structure metrics with the net debt to equity under 1x and net debt to Ebitda at around the long term target level of 2.44x.
Steel deliveries at Tata Steel Europe grew 17% sequentially and 3% y-o-y to 2.47 million tonne in 4QFY21. EBITDA improved sharply to £125 million in during the quarter.