Tata Steel Q2 Reports Indicate Profit Drops Despite Good Quarter In Indian Market

Tata Steel
Tata Steel

Loss in overseas subsidiaries meant that Tata Steel saw their profits go down. However, during the same time, the Indian business of the company improved significantly as the COVID-19 pandemic led lockdowns got lifted. According to exchange filing, consolidated net profit fell 62.7% year-on-year to ₹ 1,546.3 crores in the quarter ended September. According to a report by news agency BloombergQuint.com, analyst shows a profit at ₹ 29 crores.

Tata Steel’s revenue went up by 7.4 percent on a year-on-year basis to ₹ 37,153.9 crores. The operating profit of the company grew by 60% to ₹ 6,110.7 crores. Operating margin also improved from an earlier 11 percent to 16.4 percent.

Tata Steel is looking to separate its cash draining European Business. European steelmakers have been put under pressure due to weak demand and global overcapacity coupled with high iron ore prices. Sales figures of Tata Steel Europe have been largely flat despite benefitting from lower coking coal costs.

Tata Group is reportedly looking to sell off its unit in the Netherlands as losses mount. They are in talks with SSAB Sweden to make a deal for their sale according to a statement from the company. The company is also in the process of separating the Tata Steel U.K. and Tata Steel Netherlands businesses to pursue separate strategic paths for the two businesses.

Koushik Chatterjee, Executive Director, and Chief Financial Officer said in the statement, “Based on the discussions, initiated by SSAB Sweden, regarding a potential acquisition of Tata Steel’s Netherlands business, we will undertake a due process and move to the next stages including consultation and due diligence.”

Tata Steel, however, had a good quarter in the Indian subcontinent. Since the COVID-19 pandemic led lockdown was lifted by the Indian government, production of the company has recovered. The domestic sales volume of the company rose by 22 percent year-on-year to 5.05 million tonnes. This also marks the company’s highest-ever quarterly figure.

Several factors helped the company to achieve this record quarterly figure. Some of these factors are improved realization, lower coal prices, and relatively fewer exports. Another factor, the price rise of hot-rolled coil steel during the quarter by 4.2 percent to ₹ 39,404 per tonne added to the profit.

TV Narendran, Chief Executive Officer and Managing Director said in the statement, “The resilience of our business model and the commitment of our teams has enabled us to ramp-up capacity utilization to normal levels and achieve highest ever sales despite the ongoing challenges due to the Covid pandemic.”

He added, “There has also been a significant improvement in product mix towards domestic sales and higher value-added products and a sharp reduction in costs.”

The company also added in their statement that in India also the company will go for simplification of its structure by separating its listed and unlisted subsidiaries into four clusters to improve efficiency. The respective boards of the subsidiaries have approved a merger of Tata Metaliks Ltd. and Indian Steel and Wire Products Ltd. into Tata Steel Long Products Ltd. According to the report, this merger is expected to be completed within the next six months.