Tata Steel net profit beats analyst estimates on higher volumes and cost takeouts

With its underlying business benefiting from higher volumes, operating leverage and tight cost control in a weak pricing environment, domestic steelmaker Tata Steel Ltd’s net profit surged eight-fold in the December quarter. To be sure, that was aided by a low base from write-offs done last year at Tata Steel Europe.

Meanwhile, its European business continued to struggle in a challenging environment marked by weak demand, pricing pressure and delayed policy support, particularly in the UK. Operating revenues fell significantly in the Netherlands, and losses marginally improved in the UK.

On Friday, the company reported that consolidated net profit—attributable to the owners—jumped to ₹2,688.7 crore from ₹326.64 crore in Q3 of FY25. The performance also beat the ₹2,527.61 crore consensus estimate of 14 analysts polled by Bloomberg.

Earnings before interest, tax, depreciation and amortization (Ebitda) rose 38.9% y-o-y to ₹8,199 crore, compared with ₹5,903 crore in the year-ago period.

However, the company’s sequential growth numbers showed a different picture, with net profit declining 13% from ₹3,102 crore in Q2, and revenues falling 3%.

“In India, domestic steel prices were at multiyear lows, weighing on the steel spot spreads. Despite this, our India operations delivered an Ebitda margin of ~23% aided by value-led growth and cost optimisation,” said Koushik Chatterjee, executive director and chief financial officer of Tata Steel in a statement, adding that the company remain focused on volume growth, investments in downstream, and strengthening raw material linkages.

“December quarter prices, particularly the first part of that quarter, were probably the lowest in the last five years for flat products,” said T.V. Narendran, chief executive officer & managing director of Tata Steel in a post-earnings interaction with analysts.

“Steel prices are certainly coming back to the levels where they should be because they used to be at a discount to import landed,” Narendran said, adding that one should also watch out for rising coking coal costs, a key raw material for steel production.

While saying that the Q3 performance was largely in line with expectations, Suman Kumar, assistant vice-president for metals and mining at brokerage Philip Capital, pointed out that the jump in net profit is because last year’s numbers were impacted by additional write-offs, “as Tata Steel Europe had shut down its blast furnaces around September, which required one-time impairments and provisioning”.

Kumar added, however, that Tata Steel’s Ebitda per tonne of ₹12,000 stood out in comparison to its peers. “JSW Steel and JSPL reported Ebitda in the ₹7,000–8,000 per tonne range, while SAIL’s Ebitda per tonne was much lower at about ₹4,600. This wide disparity underscores Tata Steel’s superior product mix and structural cost advantages. Despite a weak operating environment, its strong mix, cost-control measures, and volumes supported earnings, partly offsetting the pressure on realisations due to weak pricing,” said Kumar.

Meanwhile, the country’s second-largest domestic steelmaker by capacity reported a 6% year-on-year (y-o-y) jump in consolidated revenue to ₹57,002.40 crore for the third quarter of FY26, compared to ₹53,648.3 crore from the same period last year. In Q2 of FY26, revenue was higher at ₹58,689 crore.

The steelmaker’s crude steel production in India rose 12% sequentially to 6.34 million tonnes, while deliveries increased 9% to 6.04 million tonnes.

For the overseas operations, the steelmaker’s Netherlands operations reported an Ebitda of €55 million, significantly lower than the €92 million in Q2FY26, while the UK losses narrowed to £63 million from £66 million previously in Q2FY26.

“UK market conditions continue to be pressured by subdued demand, while policy interventions are taking longer than anticipated to materialise. We are closely monitoring the situation and the evolving tariff framework and CBAM in EU, which are pivotal for rebalancing EU market dynamics,” Chatterjee added. CBAM stands for carbon border adjustment mechanism.

Narendran expects the carbon tax to improve steel prices in Europe. “CBAM and the expected safeguard revisions from June 2026 will structurally improve the competitive landscape for EU producers,” he said.

Chatterjee also weighed in, and said “irrespective of the demand condition, there will be an uptick in prices because arithmetically it has to work in that manner”.

There are two very fundamental regulatory triggers in the EU that will push up prices, Chatterjee elaborated. “One is CBAM and the second is the revision of safeguard measures from June 2026,” he said.

Tata Steel had earlier guided UK Ebitda breakeven by Q2FY26, which was pushed to the last quarter of the current fiscal. However, there is some uncertainty in achieving the guidance.

“It will not become positive till there is some action from the UK government on the imports or the steel prices go up in the UK,” said Narendran. “We are hopeful that some actions will be taken in the next few weeks by the UK government,” he added.

The Tata Group company informed that the notification of the four new Labour Codes by the Government of India has led to an exceptional charge of ₹61.11 crore (standalone) and ₹81.79 crore (consolidated) in the results, based on the company’s current assessment.

The company has spent ₹3,291 crore on capital expenditure during the quarter and the net debt declined by ₹5,206 crore sequentially to ₹81,834 crore.

The stock ended 0.3% lower at ₹197.05 on BSE on Friday.