Tata Steel, the country’s largest steelmaker, said fiscal second-quarter profit rose 5.97% from a year earlier on one-time gains and a favourable tax regime.
Net profit, including those of its units, rose to ₹3,302 crore in the quarter ended 30 September from ₹3,116 crore in the year-ago period. Consolidated revenue from operations dropped 15.5% to ₹34,579 crore from ₹40,897 crore in the year earlier.
During the quarter, the company’s earnings were boosted by a favourable tax impact of ₹4,233 crore, of which ₹2,425 crore was on adoption of the new corporate tax rate by Tata Steel standalone and some subsidiaries in India and ₹1,808 crore was on account of recognition/reversal of deferred tax assets and liabilities in offshore subsidiaries.
“We are focusing on unlocking value from our capital expenditure plans and not on increasing volumes," Koushik Chatterjee, executive director and chief financial officer, Tata Steel, said at a press conference.
“We are focused on driving productivity improvements across our various operations as well as supply chains to reduce costs and minimise the impact on margins." At the phase 2 of expansion at its Kalinganagar plant, the company is prioritizing the completion of the pellet plant for cost reduction and the cold rolling mill for value addition.
The company reported a standalone net profit of ₹3,400 crore, 1.25% higher than the ₹3,358 crore it reported last year.
In India, steel production remained flat on a quarter-on-quarter basis at 4.50 million tonnes in 2QFY20 due to the sharp slowdown in the automotive sector, particularly in the commercial vehicle segment, the company said in a press release.
The company reported production of 6.95 million tonnes (mt) in the September quarter, with India accounting for 4.50 mt, higher than the 6.73 mt and 4.30 mt, respectively reported in the same period last year.
Ebitda in its India business fell 46% to ₹3,817 crore in the quarter from ₹7,065 crore in the year earlier. Ebitda/tonne of steel fell to ₹9,238 from ₹16,368 in the quarter, while for the consolidated figures crashed from ₹12,713 to ₹6,156 crore.
T.V. Narendran, chief executive and managing director, Tata Steel, said: “The business environment in India and other geographies continued to be challenging and weighed heavily on steel prices. Our acquisitions continue to stabilize and improve on their operating performance. We are also re-organizing our India footprint in four verticals to drive scale, synergies and simplification which will create value for our stakeholders".
Weak market conditions have forced the management to cut back on its capital expenditure as well as its debt reduction plans for the fiscal.
The Tata Steel management said it would recalibrate its capital expenditure plan for FY20, which had been ₹8,300 crore.
In the second quarter, the company spent ₹2,325 crore and ₹4,895 crore so far this fiscal.
However, it might consider scaling back capital expenditure if the market sentiment does not improve.