Tata Steel Q1 net profit doubles to Rs 1,934 cr on strong demand, higher prices in domestic market
Tata Steel saw strong growth in all verticals with the automotive segment contributing 19 percent of sales and the strong demand in HCV segment is expected to continue.
Mumbai: The largest private sector alloy maker Tata Steel on Monday reported an over two-fold growth in consolidated net at Rs 1,934 crore for the three months to June period due to strong demand and higher prices in the domestic market and better operational performance in Europe.
The company had reported a net profit of Rs 921 crore during the same period a year ago and Rs 14,688 crore in the March 2018 quarter due to a one-time gain of Rs 11,376 crore. Its turnover in the June quarter grew to Rs 37,833 crore from Rs 30,973 crore, the company said.
Commenting on the performance, managing director and chief executive TV Narendran told reporters that "they could deliver strong performance due to the strong demand and buoyant spreads across all the geographies.
"Domestic deliveries grew by 14 percent as against a market growth of 9 percent. Our European operations also saw stronger profitability with an improvement in spreads and operational performance", said Narendran.
Tata Steel India's pre-tax profit jumped by 75.2 percent to Rs 5,118 crore, on account of better realisations and improved operational efficiencies, while operating margins for the quarter rose to 31.2 percent. It saw strong growth in all verticals with the automotive segment contributing 19 percent of sales and the strong demand in HCV segment is expected to continue.
The branded products segments also contributed 33 percent of total volume, Narendran said, adding the company expects underlying demand to be strong, particularly in the domestic market. The company has continued to execute its strategy of expanding its footprint in the domestic market.
Commenting on capex plan, Narendran said, the capital expenditure for the quarter was Rs 1,931 crore and company will be spending around Rs 8,000 crore during the course of the year.
"Our Kalinganagar phase 2 expansion is progressing well, with work already starting on the cold roll complex. The total estimated project cost is Rs 23,500 crore, including Rs 16,000 crore up to HRC stage," he said. The project also includes raw material handling facilities, a state-of-the-art 2.2 million tone cold rolling complex and other downstream facilities, Narendran added.
"We have successfully closed the acquisition of Bhushan Steel under the Insolvency and Bankruptcy Code process with a transaction structure that provides us close to 100 percent economic interest in the company."
"The funding for the acquisition was designed with a prudent capital structure with a significant equity component to ensure future value creation. The integration of the company is underway and is expected to deliver synergies over the next 24 months," executive director and chief financial officer Koushik Chatterjee said, adding they have launched a programme for transformation and realisation of synergies with Tata Steel and focusing on ramping up production and achieving operational efficiencies.
Commenting on the JV with German industrial major Thyssenkrupp aG for its European business, Narendran said, "we are working on seeking all relevant approvals for the JV and look forward to a strong and sustainable European business."
The JV will focus on quality and technology leadership, and the supply of premium and differentiated products to customers with annual shipments of about 21 million tonnes. The company is working towards the JV formation, including securing approvals from the relevant regulatory authorities, he added.
On the performance of its European operations, he said liquid steel production rose marginally to 2.81 million tonnes, while deliveries improved by 1.9 percent to 2.45 million tonnes in a seasonally weaker quarter. Operating profit improved significantly by 42 percent
to 183 million pounds on account of higher selling price and better operational performance.
Narendran expressed concern over the rising trade wars between the US and China and its the impact on the global economic momentum along with firming of the American dollar.
Narendran refused to comment on the acquisition of Usha Martin, but said the domestic steel market is growing and said, "We continue to evaluate opportunities".
He said the liquidity position of the group remains robust with around Rs 24,984 crore comprising of Rs 13,086 crore in cash/cash equivalents and Rs 11,899 crores in undrawn bank lines.
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