Tata Steel Q2 results: Consolidated PAT soars 661% YoY, beats estimate; sales up 55%

The steelmaker reported 54.8 per cent on-year rise in consolidated total revenue from operations to Rs. 60,282.8 crore for the reported quarter, which was sharply above Street’s expectations.

The company also announced the share swap ratio for the merger of Bamnipal Steel and Tata Steel BSL into itself. Tata Steel said that it will offer one share of the company for every 15 shares held by shareholders of Tata Steel BSL. Further, the stake held by Bamnipal Steel and Tata Steel in Tata Steel BSL will stand cancelled.

On the operating front, the company had yet another stellar quarter as it posted its highest-ever quarterly consolidated operating profit of Rs. 17,810 crore, up 222 per cent on-year. However, the consolidated operating profit was sharply below analysts’ expectations of 18,852 crore.

The company’s consolidated operating profit per tonne skyrocketed 246 per cent year-on-year to Rs. 24,112 aided by the price hikes taken by the company during the quarter.

“Tata Steel has delivered strong results across key geographies in this seasonally weaker quarter. Our steel deliveries in India expanded by 11 per cent despite a contraction in market demand which is a testament to the strength of our franchise,” said T.V. Narendran, chief executive officer and managing director at Tata Steel.

Narendran said that the company’s European operations also delivered a robust performance in the reported quarter underpinned by strong improvement in realizations.

The company’s consolidated operating margin in the quarter expanded a whopping 1,535 basis points on-year to 29.54 per cent. However, they declined 23 basis points on a sequential basis reflecting the muted price hikes taken in the quarter as compared to the previous quarter.

Further, the decline in margins on the quarter was symptomatic of the increase in production costs for the company. “We are watchful of the elevated coal prices and high energy cost as key risks to margins going forward,” Narendran said.

In India, adjusted operating profits grew 2.3 times on year to Rs. 13,877 crore whereas profit after tax stood at Rs. 8,843 crore. Revenues at the company’s European operations jumped 50 per cent on-year to 2.1 billion pound sterling with operating profit improving 2.2 times sequentially to 328 million pound sterling.

Tata Steel continued to utilize the free cash flow generated by the company to deleverage its balance sheet. The company said that gross debt fell to Rs. 78,163 crore as of September 30 aided by repayments of Rs. 11,424 crore in the first half of the current financial year.

“[We] are targeting additional, aggressive deleveraging in the second half as well,” said Koushik Chatterjee, executive director and chief financial officer at Tata Steel.

Tata Steel said that it spent 2,191 crore during the quarter on capital expenditure and saw an increase in working capital of Rs. 3,889 crore.

Shares of the company ended 0.1 per cent higher at Rs. 1,300 on the National Stock Exchange.