Tata Steel's net profit jumps 75 per cent in June quarter amid cost-cutting measures

TATA STEEL reported a 75 per cent increase in its consolidated net profit, reaching ₹918.57 crore (£859.57m) for the June 2024 quarter, driven by reduced expenses.

In the same quarter of the previous fiscal year, the company had posted a net profit of ₹524.85 crore (£491.13m), according to a filing with the stock exchange.

However, the company’s total income decreased to ₹55,031.30 crore (£51.50 billion) during the quarter, compared to ₹60,666.48 crore (£5.67bn) a year earlier. Tata Steel managed to cut its expenses significantly, bringing them down to ₹52,389.06 crore (£4.90bn) from ₹58,553.25 crore (£54.79bn) in the corresponding period last year.

In India, the company reported a profit of ₹3,335 crore (£3.12bn) during the latest April-June quarter, down from ₹4,995 crore (£4.67) in the year-ago period.

Meanwhile, the board of the company gave approval to acquisition of a 26 per cent stake in TP Parivart Ltd.

As part of the plan, the company said it will infuse, in one or more tranches, up to ₹35 crore (£3.27m) and execute a Share Purchase & Shareholders' Agreement (SPSA) with Tata Power Renewable Energy Ltd (TPREL) and its wholly-owned subsidiary TP Parivart Ltd (TPPL), to acquire and hold 26 per cent equity stake in TPPL.

The board also approved the proposal to infuse funds, in one or more tranches, up to ₹6,000 crore (£5.61bn), by way of subscription to equity shares of Neelachal Ispat Nigam Limited (NINL), subsidiary of the company, during FY25.

Besides, the board has cleared the scheme of amalgamation amongst Rujuvalika Investments Limited, a wholly-owned subsidiary of the company, as well as Tata Steel and their respective shareholders, the filing said.

In a separate statement, Tata Steel's chief executive officer and managing director TV Narendran said during the quarter, subdued steel demand across most regions weighed on global steel prices. In India, steel demand was broadly stable despite some impact due to elections and heatwaves.

The 5 MTPA expansion project at Kalinganagar is on track for the blast furnace to start in September 2024. The heating process for blast furnace stoves and coke oven batteries has commenced as planned, he said.

In the UK, the company ceased operations at one of the blast furnaces (BF-5) at Port Talbot and it's on track to close the remaining blast furnace by September 2024.

"Tata Steel has launched the first carbon bank in India. Further, Tata Steel also recently deployed the first-ever crew of female firefighters in the Indian steel industry," he added.

Koushik Chatterjee, executive director and chief financial officer, Tata Steel, said India revenues were around ₹33,194 crore (£31.06bn) and EBITDA was ₹7,029 crore (£6.57bn), which translates to an EBITDA per tonne of Rs ₹14,227 (£133.14) and an EBITDA margin of 21 per cent.

Revenues from the Netherlands were broadly stable despite subdued demand dynamics, but cost profile continued to improve with stabilisation of operations leading to improvements in EBITDA.

Given the planned closure of blast furnaces in the UK, there has been steel stock build-up for the downstream operations which impacted working capital. Tata Steel is committed to supporting affected employees, and has offered a package in Tata Steel UK.

"The Voluntary Redundancy Aspiration process was launched on July 10 and will close on August 7. We are working closely with the recently elected UK government on finalisation of grant funding process for the new Electric Arc Furnace project. We have also started active engagement with the government in Netherlands on support for the decarbonisation project," the CFO said.

"We continue to focus on growth in India and have spent ₹3,777 crore (£3.53bn) on capital expenditure during the quarter. Net debt stands at ₹82,162 crore (£76.88bn). Group liquidity position remains strong at ₹36,460 crore (£34.11bn), which includes ₹10,799 crore (£10.10bn) of cash and cash equivalents. We also remain focused on cost optimisation, operational improvements and working capital management to maximise cashflows," Koushik said. (PTI)