Tata Steel reports the highest ever consolidated quarterly EBITDA

Balance sheet de-leverage continues with net debt reduction of Rs18,609 crore (approx $2.55 bn) in the first nine months of the financial year

Highlights:

• Consolidated EBITDA increased 53 percent QoQ and 2.6x YoY to Rs9,540 crore with improved realisation across key entities
• Consolidated profit after tax improved 2.4x QoQ and 4.3x YoY to Rs4,011 crore.
• Consolidated free cash flow was Rs12,078 crore during 3QFY21 and Rs20,588 crore in the first nine months of the current financial year driven by strong operating performance, disciplined capital expenditure and working capital management.
• The company continues to prioritise on capital expenditure; it spent Rs1,394 crore on capex during the quarter. The company has decided to restart work on the pellet plant and cold roll mill complex at Tata Steel Kalinganagar. Both the pellet plant and cold roll mill complex, once completed, will expand margin.
• As part of the enterprise deleveraging plan, Tata Steel has completed reduction of net debt by Rs18,609 crore in the first nine months of the current financial year. During the third quarter, the company reduced the leverage by Rs10,325 crore. As part of the continued de-leveraging strategy, further deleveraging is being undertaken in 4QFY21.
• India¹ operations
  • Crude steel production remained strong at 4.60 million tons; registered a 3 percent YoY growth in 3QFY21.
  • Domestic deliveries grew 8 percent QoQ and 4 percent YoY to 4.16 million tons. Exports shrank below 11 percent of overall deliveries. Sales witnessed strong momentum but was constrained by lower opening inventory.
  • Achieved the highest ever quarterly EBITDA of Rs8,811 crore with 46 percent QoQ and 2.14x YoY growth; driven by higher prices, better product mix, lower exports and operating efficiency initiatives. This translates into an EBITDA per ton of Rs18,931 and an EBITDA margin of 34.9 percent.
  • Tata Steel Standalone achieved the highest ever quarterly EBITDA of Rs6,737 crore with 43 percent QoQ and 78 percent YoY growth. This translates into an EBITDA per ton of Rs20,175 and an EBITDA margin of 37.5 percent.
  • Key Indian subsidiaries also delivered robust financial performance with Tata Steel BSL and Tata Steel Long Products generating an EBITDA of Rs1,634 crore and Rs440 crore during the quarter. This translates into an EBITDA/t of Rs14,223 and Rs26,471, respectively.
• TSBSL merger with Tata Steel is progressing ahead. The merger of Tata Metaliks and Indian Steel and Wire Products with Tata Steel Long Products in also underway.
• Following the termination of the discussions with SSAB on Tata Steel Netherlands (TSN), the company will be focusing on performance and cash flows in the immediate term. Tata Steel is committed to arrive at a strategic and sustainable resolution for its European portfolio. Tata Steel’s IJmuiden plant is among the most environmentally efficient and cost-competitive steel producers in Europe. The process to separate Tata Steel Netherlands and Tata Steel UK is currently underway.
• Tata Steel is committed to sustainability of operations. It is taking initiatives to adopt best available technologies and pursuing collaborations for decarbonisation and water neutrality. It is also increasing efforts towards ensuring a responsible supply chain and circular economy, including development of environmentally sustainable products. Tata Steel continues to drive increased transparency and disclosure on climate standards. Tata Steel’s climate disclosure has been rated “A-” by CDP² in its recent review.

Financial highlights

1.India includes Tata Steel Standalone, Tata Steel BSL and Tata Steel Long Products on proforma basis without inter-company eliminations; 2. Consolidated figures don’t include NatSteel Holding and Tata Steel Thailand which are classified as ‘assets held for sale’; 3. Production numbers for consolidated financials are calculated using crude steel for India and liquid steel for Europe 4. Adjusted for fair value changes on account of FX rate movement on investments in T Steel Holdings and revaluation gain / loss on external / internal company debts / receivables at TS Global Holdings

Management comments:

TV Narendran, CEO and managing director:
“The recovery in the global and Indian economy has led to sharp improvement in steel demand in India. We pivoted our deliveries to domestic markets, to cater to the requirements of our local customers by reducing exports. All the segments, especially automotive, have performed extremely well supported by our continuous focus on strong customer relationships, superior distribution network, brands and new product developments. We are also making good progress on our various initiatives to de-risk the business while our digital marketing platforms are helping us reach new markets and be future ready. The investments in infrastructure and recent policy developments, to drive economic growth, should drive steel demand in India. Given strong market conditions and our success with deleveraging, we have restarted work on the pellet plant and the CRM complex at Kalinganagar, which will help in reducing costs and improving revenues.

“In Europe, our underlying performance has improved quarter on quarter while the reported EBIDTA was negatively impacted by few one-offs. We remain committed to arrive at a strategic and sustainable solution for Tata Steel Europe, though in the immediate term, we will focus upon business performance and cash flows.”

Koushik Chatterjee, executive director and CFO:
“Continuing with the recovery from the deep impact of the pandemic in the first quarter of the financial year, Tata Steel has delivered one of the best financial performances during this quarter with the highest ever consolidated EBITDA of Rs9,540 crore and free cash flows of over Rs12,000 crore on the back of strong underlying operating performance of the India business, sharp focus on capital allocation and working capital management. All our operating hubs in India have performed exceptionally well with the stand alone EBIDTA margin at 37.5 percent. Our key subsidiaries Tata Steel BSL and Tata Steel Long Products have also reported the highest ever profitability in recent years.

“Our enterprise strategy on debt management continues to be on target. After reduction in net debt by Rs8,285 crore in the first half which surpassed our annual de-leveraging target of $1 billion, we continued to aggressively reduce our net debt by Rs10,325 crore and gross debt by Rs5,640 crore during the quarter, taking the nine-month reduction in net debt by Rs18,609 crore and gross debt by Rs7,649 crore. This has significantly improved the credit metrics of the company. Our cash flow generation remains strong and in addition to the de-leveraging in the first nine months, we will further reduce the gross debt by more than Rs12,000 crore in the fourth quarter of the current financial year. We have restarted allocating capital on margin expansionary growth projects in India within the contours of the targeted financial framework.”

Disclaimer:

Statements in this press release describing the company’s performance may be “forward looking statements” within the meaning of applicable securities laws and regulations. Actual results may differ materially from those directly or indirectly expressed, inferred or implied. Important factors that could make a difference to the company’s operations include, among others, economic conditions affecting demand / supply and price conditions in the domestic and overseas markets in which the company operates, and changes in or due to the environment, government regulations, laws, statutes, judicial pronouncements and / or other incidental factors.

¹India includes Tata Steel Standalone, Tata Steel BSL Ltd. and Tata Steel Long Products Ltd. on proforma basis without inter-company eliminations

² CDP is an international non-profit organisation that runs the global disclosure system for investors, companies, cities, states and regions to manage their environmental impacts