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Tata Steel, a global steel giant, has announced positive financial results for the second quarter of its fiscal year, marking a turnaround from the losses incurred in the same period last year. The company's consolidated net profit for the July-September quarter reached Rs 759 crore, a significant improvement compared to the Rs 6,511 crore loss recorded in the corresponding period of 2022. This turnaround can be attributed primarily to the strong performance of Tata Steel's operations in India and the Netherlands, which both reported profits in contrast to the losses they faced in the previous year.
The company's consolidated turnover, however, dipped slightly to Rs 53,905 crore from Rs 55,682 crore in the previous year. This decline can be attributed to the challenging global operating environment, marked by subdued growth in key regions and the continued impact of macroeconomic conditions in China on commodity prices, including steel. Despite these challenges, Tata Steel's earnings before interest, tax, depreciation and amortization (EBITDA) demonstrated growth, rising to Rs 6,224 crore from Rs 4,315 crore in the year-ago period. Consolidated operating margins also saw an improvement, climbing 300 basis points to 12%, fueled by increased volumes in India and a boost in profitability in the Netherlands.
Examining the performance of individual regions, Tata Steel's operations in India achieved a notable increase in sales, reaching 5.11 million tonnes during the quarter, compared to 4.81 million tonnes in the same period of the previous year. While turnover for the quarter remained lower year-on-year due to subdued prices, the operating profit remained steady at Rs 6,912 crore. Operating margins in India stood at 21% for the quarter, with a turnover of Rs 32,660 crore. In contrast, the company's UK operations faced significant challenges, resulting in an operating loss of 147 million pounds sterling. This loss was attributed to the compression in steel spreads, a phenomenon that also impacted the company's performance in the Netherlands. However, the Netherlands operations managed to register a positive operating profit of 22 million pounds sterling.
The UK's performance was further burdened by the decommissioning of its blast furnaces and the buildup of steel stock for downstream operations. In September, Tata Steel completed the shutdown of its remaining blast furnace in the UK. This move is part of the company's strategic shift towards the construction of an electric arc furnace in the region. A contract has already been signed with Tenova for this project. In a parallel move, Tata Steel has also placed orders for equipment for an electric arc furnace in Ludhiana, India. The company's capital expenditure during the April-September period reached Rs 8,583 crore, leading to an increase in net debt to Rs 88,817 crore at the end of September, compared to Rs 82,162 crore at the end of June. Despite this increase, Tata Steel has a significant amount of cash and cash equivalents, totaling Rs 10,575 crore.
Moving forward, Tata Steel is focused on optimizing costs, enhancing operational efficiency, and managing working capital to maximize cash flow. This strategic approach reflects the company's commitment to navigating the challenges of the global steel market while pursuing growth opportunities in key regions. As Tata Steel continues to invest in new technologies, such as electric arc furnaces, it aims to position itself for a sustainable future in the evolving steel industry.
Source: Tata Steel Q2 Results: Co back in black as against loss in year-ago period