Tata Steel reported a strong set of earnings for the quarter ended September 30 on Thursday with the consolidated profit after tax (PAT) rising to Rs 12,548 crore, up 7.5x from Rs 1,665 in the corresponding quarter last year. The PAT beat Street expectations as analysts had expected the figure to be between Rs 11,000 crore and Rs 12,000 crore.
“Volumes are flat, the margins are flat, overall we expect the margins per tonne to be flat quarter on quarter (QoQ),” said TV Narendran, MD and CEO, Tata Steel while discussing earnings fine print.
India the margins are expected to come down a little bit because India will see the impact of the coking coal cost and iron ore prices are less relevant for India, so on a consolidated basis, the margins will be flat, he noted.
Overall Europe will continue to be positive. In terms of costs, iron ore costs are coming down which is positive for Europe, coal costs have peaked, there are other energy costs going up in Europe which is also something the company is watchful of.
“Overall we expect European performance to continue to repeat what we have done in Q2 in that space over the next two quarters,” he shared.
“European spreads will improve a bit, anything from euro 25-50 per tonne over the next quarter,” he added.
The company is not looking at selling its European business.
“We are not looking actively for anyone to sell to. Our focus over the last few years has been to try and make the European business self-sufficient – both the Dutch business and the UK business and it is in that context that we split Tata Steel Europe into Tata Steel Netherlands and Tata Steel UK,” he mentioned.
When asked about European business getting listed on the bourses post splitting, he replied, “No plans as yet. Just now the focus will be on running it very tightly, very lean way and plan for the transition for a greener future.”
A lot of the working capital is a reflection of the higher input prices that the company has to bear both in Europe and in India.
“We will get some benefit as iron ore prices drop but in terms of efficiency metrics, we will pullback some by the end of the year and we will release some working capital over the next quarters,” he said.
The company plans to end the year at net debt to equity of less than one.
Net debt by the end of this year could fall below Rs 60,000 crore by the end of FY22, he noted.
Tata Steel may exit Southeast Asian business in H2FY22, he stated.
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Tata Steel will be very prudent about growth plans and will take a call at an appropriate time
There are no plans to buy NMDC steel plant, he said.
“Neelachal Ispat Nigam Limited (NINL) – we are looking at the possibility but the process is going on, RINL – there is no process as yet. As and when the process comes, we will look at it,” he explained.
For the full interview, watch the accompanying video.
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