25 Jul 2022
Tata Steel Ltd struggled with global and domestic headwinds to report a growth in net sales in the June quarter but could not overcome the input cost pressures, particularly from the impact of jump in raw material costs.
It meant that the net sales of the steel major grew reasonably fine but operating profit was hit significantly and the impact percolated down further to the bottomline which fell too.
The company’s consolidated net profit in Apr-Jun fell 12.9% on the year to 77.6 bln rupees. On the other hand, the consolidated net sales rose 19% to 634.3 bln rupees.
Sequentially, however, both were down. The consolidated net profit fell 21% while the net sales were down by 8.5%.
Tata Steel’s operating profit declined 7% on the year and 0.3% on the quarter to 149.8 bln rupees in the June quarter. At 23.6% the operating margin was lower than 30.1% a year ago but higher than 21.7% in the previous quarter.
The company’s executive director and chief financial officer Koushik Chatterjee said that there was a sharp rise in input costs especially coking coal and gas prices in Europe.
In volume terms, the company’s consolidated sales fell 6.9% on the year to 6.62 mln tn. The rise in consolidated revenue despite this fall indicated that the company got higher realisation on its sales.
Volumes were hit more in Tata Steel’s overseas plants. While sales volume from domestic units declined 1.9% to 4.07 mln tn, the overseas units’ volume fell nearly 14% to 2.55 mln tn.
But in value terms, a higher realisation enabled the overseas units’ sales to rise strongly by 22% to 294.3 bln rupees while sales from domestic units rose 16% to 340 bln rupees.
Tata Steel’s profitability was hit primarily due to a surge in raw material costs and other expenses.
In Apr-Jun, the consolidated raw material costs soared by 64% on the year to 263.2 bln rupees. Other expenses were sharply up by 28% to 192.7 bln rupees.
A high tax outgo also contributed to the fall in the net profit. The consolidated tax expenses were up 82% on the year to 41.9 bln rupees.
According to Chatterjee volatility in steel prices and input costs will continue in Jul-Sep but the spreads will likely stabilise in the second half of 2022-23 (Apr-Mar).
In the June quarter Tata Steel incurred capital expenditure of 27.25 bln rupees.
The company’s net debt stood at 545 bln rupees as of Jun 30.
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