Tata Steel three-fold net profit worth Rs 3,116 cr in Q2
Improved margins driven better operational performance, especially by its recent takeover Bhushan Steel, helped Tata Steel Tuesday report an over three-fold jump in consolidated net profit at Rs 3,116.2 crore for the quarter to September.
The company had reported a consolidated net profit of Rs 1,017.7 crore in the year-ago period. Consolidated turnover increased to Rs 43,898.53 crore from Rs 32,675.5 crore, boosted by revenue from Bhushan Steel, the company said. At the consolidated level, the operating margin rose to 21 per cent at Rs 12,131 a tonne, while on a standalone basis it jumped to 34 per cent to Rs 19,244 a tonne, it said.
Domestic deliveries rose to 4.32 million tonne, which is 58 per cent of the group deliveries which rose 15 per cent to 7.42 million tonnes during the quarter. "Strong operational performance was primarily on the back of additional revenue from Bhushan Steel, improved deliveries in the domestic market and better realisation across geographies," executive director and chief financial officer Koushik Chatterjee told reporters here this evening.
He further said the integration and synergies of Bhushan Steel, which the company bought through the bankruptcy process for Rs 35,200 crore during the quarter, have been on track and that is reflected in Bhushan Steel's pre-tax margin of Rs 10,291 per tonne. Chief executive and managing director TV Narendran said the domestic demand has been good and so was the domestic prices have been buoyant. "The Tata Steel Group has delivered extremely strong results this quarter driven by robust operational performance and favourable business conditions in the home market.
"Despite a seasonally weaker period, we sold 4.32 million tonnes across Tata Steel standalone and Bhushan Steel. This demonstrates our strong customer relationships and the strength of our marketing franchise," he said. Narendran further said the company continues to work on its strategy of increasing its domestic footprint and will ramp up operations at Bhushan Steel and implement our 5 million tonnes per annum expansion at the Kalinganagar facility in Orissa.
In line with this, the company has also signed definitive agreements to acquire the 1 million tonnes speciality steel business of Usha Martin which will strengthen Tata Steel's capability in longs products, Narendran said. Tata Steel bought Usha Martin for around Rs 4,700 crore during the quarter, though a final approval from the NCLT is awaited.
When asked about the European Union launching a probe into the proposed creation of a joint venture between Tata Steel Europe and Germany's Thyssenkrupp, Narendran said the company is engaging with the Commission and supporting them. "We were expecting it to go to phase 2 and we don't feel it is something unusual.
The Commission has 90 working days and they have started the process. They have asked us a few questions and we are engaging with them and we are supporting them in the investigation," he said. Explaining further, Chatterjee said in the merger control clearance the Commission has made three observations on electrical steel, packaging steel and automotive steel.
"We are in a constructive engagement with the Commission along with Thyssenkrupp and we will work together to address all their concerns in the manner which they would want us to," he added. On the issues concerning trade wars, Narendran said, "global steel industry demand is good.
Chinese demand has increased by 7-8 per cent in the past eight months, while its production has grown by 6 per cent, which means China is exporting less. Also, there is growth in demand in the US, Europe and Russia."
"At the same time, there is good demand in India and Southeast Asia. Due to the trade actions, there is some diversion in demand, but the consequences of the good macro market and good demand growth have reduced the impact of the trade wars," Narendran added.
Chatterjee said the group had liquidity of Rs 26,470 crore of which cash/cash equivalent was Rs 14,478 crore and in sanctioned bank loans of Rs 11,992 crore. Its consolidated debt stood Rs 1.04 trillion, rose by Rs 2,065 crore during the quarter driven by a forex loss of Rs 3,528 crore. The Tata Steel counter closed at Rs 589.15 on the BSE, up 1.07 per cent on a day when the index jumped 333 points.
(With inputs from agencies.)