Mumbai: Tata Steel Ltd on Tuesday posted its first profit in five quarters as a strong performance by its Indian business, a rebound in demand and higher pricing helped counter weak sales in Europe.
The steel maker reported a consolidated net profit of Rs231.90 crore in the quarter to 31 December, compared with a net loss of Rs2,747.72 crore a year ago. Revenue rose 14% to Rs29,391.60 crore from Rs25,766.89 crore a year earlier.
Fifteen analysts polled by Bloomberg had expected Tata Steel to report a consolidated net profit of Rs130 crore; two analysts had expected revenue of Rs29,436 crore.
Global steel mills have seen profits jump after prices of the alloy advanced because of government stimulus in China, the world’s biggest consumer. At the same time, a ramp-up in capacity in India saw volumes increase, boosting sales of local mills.
At Tata Steel, India business revenue rose 39% to Rs14,106.04 crore in the quarter to December. Revenue at Tata Steel Europe fell 6.3% to Rs12,537.08 crore.
Over the past two years, Tata Steel has cut jobs and shuttered some of its plants in Europe, blaming competition from cheap Chinese imports, a strong pound and high costs.
Total costs in the quarter rose 3.9% to Rs27,232.08 crore. Finance costs alone rose 40.5% to Rs1,387.40 crore.
The company said that its steel deliveries in the December quarter stood at 6.11 million tonnes. As of 31 December, Tata Steel’s net debt stood at Rs76,680 crore.
In India, Tata Steel said its deliveries rose 27% year-on-year, at a time when the domestic markets contracted by 2%. Its automotive sales grew by 20% year-on-year, sales in the industrial products, projects and exports vertical rose 47% while those in branded products grew 13%, Tata Steel said in a statement.
“While the broader market was affected by lower rural sales and adverse consumer sentiments, we were able to increase overall volumes by 14% sequentially and register strong growth across all our target customer segments. Further, our focus on cost improvement initiatives and our integrated operations helped us to contain the impact of rising raw material prices,” said T.V. Narendran, managing director, Tata Steel India and South East Asia.
The third-quarter performance was primarily driven by healthy domestic price realizations, which increased by about Rs3,500 per tonne on a quarter-on-quarter basis, ICICIdirect.com Research said in a note to clients.
“Tata Steel’s sales volume from the Indian operations came in at 3 million tonnes (mt), higher than our estimate of 2.7 mt, while the sales volume from the European operations came in at 2.4 mt, higher than our estimate of 2.3 mt,” said the note.
In December, subsidiary Tata Steel UK reached an agreement with trade unions to replace its defined benefit pension scheme British Steel Pension Scheme (BSPS) with a defined contribution plan.
“The strategic initiatives in the UK on the pensions continue to be an important priority for the company and we welcome the Union’s recommendation to its members to support the ballot process that is currently on to close the BSPS to future accruals,” said Koushik Chatterjee, group executive director (finance and corporate).
In a separate BSE filing on Tuesday, Tata Steel said it had elected N. Chandrasekaran as chairman of its board and appointed Peter Blauwhoff as an additional independent director effective immediately. Chandrasekaran, who was appointed as a member of the steel maker’s board on 13 January, is chief executive and managing director of Tata Consultancy Services Ltd and is the chairman designate of Tata Sons Ltd, the group holding company, where he will replace the ousted Cyrus Mistry.