Tata Steel profit more than doubles in June quarter

Steel maker Tata Steel Ltd's net profit more than doubled in the quarter ended 30 June, helped by one-time exceptional gains and other income.

The company on Tuesday reported a consolidated net profit of Rs.762.96 crore, 126% higher than the Rs.337.33 crore profit reported a year ago. Total income fell 15% from Rs.36,643.35 crore to Rs.31,062.5 crore. In a Bloomberg poll, 16 analysts estimated sales of Rs.29,584.5 crore and 22 analysts estimated a loss Rs.555.7 crore at the consolidated level. Other income for the April-June quarter was at Rs.762.17 crore, 253% higher than Rs.216.14 crore reported a year ago.

"Other income during the quarter includes gains of Rs.696.79 crore from sale of quoted investments," the company said in its statement to BSE. The company also reported an exceptional gain of Rs.158.43 crore for the June quarter. "Exceptional items at the stand-alone level include profit of Rs.105.14 crore from the sale of the company's stake in Tata Projects Ltd. Further, the consolidated results includes profit of Rs.52.64 crore on sale of the group's stake in two of its joint ventures in Europe," the statement said.

On a stand-alone level, the company reported a 45% drop in net profit to Rs.1,248 crore for the April-June quarter. The stand-alone results reflect the company's India operations. Total income for the same period fell from Rs.10,611.76 crore to Rs.9,842.55 crore, a dip of 7%. For its India operations, the company reported a 26% drop in Ebitda (earnings before interest, taxes, depreciation, and amortization) to Rs.2,411 crore for the quarter ended June.

"The Indian steel industry continues to bear the brunt of a surge in imports and tepid domestic demand, which led to a sharp drop in steel prices over the quarter," said T.V. Narendran, managing director of Tata Steel India and SouthEast Asia, in the statement. Ebitda for its European operations fell 42% to Rs.575 crore. "The decrease was largely attributable to the adverse sterling euro currency movement impacting the UK operations," the company statement said.

"Market conditions have worsened this year... Surging imports constitute a threat to European steel-making. Uncompetitive energy costs and the strength of sterling are hurting our UK operations. These three factors caused our first quarter financial performance to deteriorate, despite our more stable production platform as seen in our improved operating performance," said Karl-Ulrich Köhler, managing director and chief executive officer, Tata Steel, Europe. Steel deliveries from India operations increased to 2.14 million tonnes (mt) in the June quarter from 2.10 mt a year ago. For Europe, Tata Steel reported a 7% rise in deliveries to 3.44 mt.

"The results were in line at the operating level. Due to the other income, profit has been above estimates. We expect operations-wise things are likely to deteriorate further from what they were in the June quarter. There is the mine closure impact also likely to show in the September quarter," said a metals analyst from a foreign brokerage firm, who did not want to be identified.

Tata Steel's Noamundi iron ore mines in Jharkhand have stopped despatch of iron ore as the state government has discontinued the issuance of challans for the same. The mine caters to Tata Steel's Jamshedpur steel plant and its closure is likely to have a financial impact. In a separate development, Tata Steel also executed the sale of 19.4 million shares it held in Titan Co. Ltd to parent company Tata Sons Ltd on Tuesday.