Tata Steel back in black, logs Rs 231 cr profit in Q3 despite demonetisation pain
While the broader market was affected by lower rural sales and adverse consumer sentiment, Tata Steel saw an increase in overall volumes due to the strength of our franchise, said the company
New Delhi - Driven by improvement in sales volume and higher prices of steel, Tata Steel today got back to the profit mode by posting a consolidated net profit of Rs 231.40 crore for the December quarter.
It had registered a consolidated net loss of Rs 2,747.7 crore in the same quarter of the previous fiscal.
The consolidated gross sales increased to Rs 29,279 crore, from Rs 25,662.3 crore in the year-ago period.
In a statement, the company said: "Consolidated revenues (are) up by 7 percent sequentially and 14 percent year-on-year. The growth is largely driven by strong performance from Indian operations."
However, the total expenses went up to Rs 27,232 crore in September-December, up around 4 per cent from a year earlier.
"Tata Steel recorded strong sales this quarter as the strength of our franchise helped us counter headwinds due to demonetisation. While the broader market was affected by lower rural sales and adverse consumer sentiment, we were able to increase overall volumes by 14 percent sequentially and register strong growth across all our target customer segments," said T V Narendran, MD, Tata Steel India and South East Asia.
"Further, our focus on cost improvement initiatives and integrated operations helped us contain the impact of rising raw material prices."
Its Kalinganagar facility "continues to ramp up smoothly and we are well positioned to serve the increase in demand due to the expected thrust on infrastructure in 2017-18".
"Our SEA operations delivered stronger operating performance this quarter due to a combination of better market conditions, cost rationalisation and higher exports," he added.
According to Koushik Chatterjee, Group Executive Director (Finance and Corporate), the strategic initiatives in the UK on the pensions continue to be a priority for the company.
"We welcome the unions' recommendation to its members to support the ballot process that is currently on to close the BSPS (British Steel Pension Scheme) to future accruals. This is part of the several steps being undertaken to make the UK business more sustainable in future," Chatterjee said.
"We continue to be deeply engaged with the British Steel Pension Trustees and the regulator towards developing a structural solution for the UK pensions in coming months."
Elaborating on its India operations, the company said deliveries grew by 14 per cent sequentially and 27 percent yoy, besting the domestic market that grew 3 percent sequentially and contracted by 2 per cent yoy.
Its Kalinganagar steel plant crossed 1.5 mt of hot metal and 1 mt of hot rolled coil production since commissioning in May 2016.
Similarly, the performance of ferro alloys and minerals division registered a sharp improvement on the back of improved market conditions.
"Operating profit of the division at Rs 302 crore is higher by Rs 141 crore sequentially and by Rs 267 crore yoy, the company said.
About its European operations, it said liquid steel production of 2.68 million tonnes was almost flat sequentially, but 4 per cent lower than a year ago.
"Deliveries of 2.37 million tonnes were 3 percent higher sequentially, but 13 per cent lower yoy following the strategic decision to focus on higher-value added products in the UK," it said.
"EBITDA for the quarter improved to Rs 610 crore compared with a loss of Rs 757 crore a year earlier as a result of a more competitive pound, a lower UK cost base and more favorable market conditions. Higher raw material and energy costs in the third quarter of 2016-17 led to EBITDA being Rs 425 crore lower sequentially," it added.
Differentiated product sales continued to gather pace, with the proportion of total sales jumping to over 35 percent and their value going up by almost 30 per cent year on year.
The company said its gross debt remained stable at Rs 84,752 crore as on December 31, 2016. The net debt stood at Rs 76,680 crore.
It further said there is strong liquidity position with cash and cash equivalents and current investments including undrawn bank lines of Rs 15,000 crore.
Tata Steel UK, an indirect wholly-owned subsidiary of Tata Steel, reached an agreement with the trade unions to move towards the closure of its defined benefit pension scheme to future accrual and take an important step towards a more sustainable future. The ballot on the scheme is currently open.
Tata Steel UK signed a letter of intent with Liberty House Group to enter into exclusive negotiations for the potential sale of its specialty steel business for an enterprise value of 100 million.
"Tata Steel Minerals Canada together with its parent companies concluded Direct Shipping Ore Project de-risking transaction, securing equity and debt investments of CAD 175 million from the Government of Quebec. Achieved sales of 1.6 million tonnes," it said.
"Our European strategy continues to be focused on developing differentiated products and services which improve our customers' competitiveness," Hans Fischer, MD and CEO of Tata Steel in Europe, said.
"Sales of differentiated products were 13 percent higher and their value-add almost 30 per cent higher than a year ago, with stronger sales in the automotive and construction sectors," Fischer said.
This helped the company achieve an Ebitda in the third quarter of Rs 610 crore though this was lower than the sequential quarter due to higher raw material and energy costs.
"Our third quarter Ebitda result was significantly better than the loss recorded in the previous year, partly due to better market conditions and the weakness of the pound relative to the euro," Fischer said.
"We are continuing to focus on improving our competitive performance in the context of the global supply-demand imbalance which held deliveries steady from European mills in the nine months to September despite growth in EU demand."
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