Tata Steel on Friday reported 59.55 per cent year-on-year decline in its consolidated net profit at Rs 1,635 crore for the second quarter ended September 30, 2020. The country's largest steel manufacturer had posted consolidated net profit of Rs 4,043 crore in the year ago period and net loss of Rs 4,609 crore in June quarter of the current fiscal, Tata Steel said in a filing to the Bombay Stock Exchange.
Consolidated revenue of the Tata Group company rose by 59.69 per cent to Rs 37,154 crore in Q2 FY21 from Rs 34,579 crore in Q2 FY20. On the operational front, consolidated EBITDA surged 10.4 times QoQ and 60 per cent YoY to Rs 6,217 crore.
Tata Steel said that it generated free cash flow of Rs 7,832 crore during the quarter under review. The company is committed to deleveraging $1 billion annually and has reduced net debt by Rs 8,197 crore during the quarter.
Commenting on Q2 earnings, V Narendran, Tata Steel's CEO & Managing Director, said, "Tata Steel has delivered strong results in India with broad based, market leading volume growth and strong cash flow generation. The resilience of our business model and the commitment of our teams has enabled us to ramp-up capacity utilisation to normal levels and achieve highest ever sales despite the ongoing challenges due to the COVID pandemic. There has also been a significant improvement in product mix towards domestic sales and higher value-added products and a sharp reduction in costs. We are now embarking on re-organising our Indian subsidiaries into four verticals to drive scale, synergies and simplification which we are confident will create value for our stakeholders."
Quarterly deliveries at India operations grew 72 per cent QoQ and 22 per cent YoY, Tata Steel said, adding that all major sites in the country close to full capacity utilisation during September quarter. "EBITDA from India operations surged 4.1x QoQ and 49 per cent YoY to Rs 6,025 crores, driven by higher volumes, improved realisations and cost efficiencies," it said.
During the July-September quarter, the company initiated discussions with SSAB Sweden based on interest received for the potential acquisition of Tata Steel's Netherland business including IJmuiden steelworks. It has also initiated the process to separate Tata Steel Netherlands and Tata Steel UK and will pursue separate strategic paths for the Netherlands and UK business in the future.
Tata Steel's board also approved the proposal to exercise Call Option to redeem the unsecured, rated, listed non-convertible debentures (NCDs)/perpetual hybrid securities (PHS) in the form of NCDs of the company.
On business outlook, Tata Steel said that global steel demand is expected to improve gradually while the full year decline in 2020 is expected to be lower than earlier estimates. In India, steel demand continues to improve, supported by government spending on infrastructure, festive season and higher rural consumption on the back of good monsoon.
On COVID-19 pandemic, the company said that the re-imposition of lockdowns amid resurgence of infections poses a key risk. "The downturn in steel demand due to the COVID-19 pandemic is expected to adversely impact the future business outlook of Tata Steel UK Limited (TSUK), a subsidiary of the company held through Tata Steel Europe Limited (TSE), with respect to its ability to continue as a going concern and meet its liquidity requirements," it said.
Ahead of Q2 earnings, shares of Tata Steel ended Friday's trade at Rs 486.50, up 2.82 per cent, against previous closing price of Rs 473.15 on the BSE.