Tata Steel Q2 FY’21 results – Key Takeaways

Indian steel major – Tata Steel (TSL) has recently announced its Q2 FY’21 results. In the Q2 FY 21 investor’s call, TSL reported its standalone domestic sales volumes rose 22% y-o-y to 5.05 mn t—it’s highest-ever quarterly figures. Improved realisation, lower coal prices and relatively fewer exports helped Tata Steel improve its operational profit.
Major key takeaways of investors call are listed below:

• Crude steel production rose by 54% q-o-q: Crude steel production of Tata Steel India rose by 54% q-o-q and 2% y-o-y to 4.59 mn t with all major sites now operating at close to full capacity utilization and downstream operations back to pre-COVID levels.
• Highest ever quarterly deliveries of 5.05 mn t: TSL India achieved highest ever quarterly deliveries of 5.05 mn t – a growth of 72% q-o-q and 22% y-o-y, by leveraging robust marketing network, strong customer relationships and technology.
• Exports scaled down to 24% of overall deliveries: Tata Steel exported around 1.19 mn t steel in Q2 FY’21 against 1.47 mn t in Q1 FY’21. Exports scaled down to 24% of overall deliveries versus 50% share in Q1. This was due to sharp ramp up of domestic
  deliveries to 3.86 mn t.
• Tata Steel BSL achieved highest ever quarterly deliveries: It achieved highest-ever quarterly deliveries of 1.27 mn t; capacity utilization is now back to pre- COVID levels. It reported crude steel output of 1.14 mn t in Q2 FY’21.                                                                                                                                                                                                                           

Broad based growth on both QoQ and YoY basis across all key business verticals

• EBITDA surged 3.7x q-o-q –Tata Steel Standalone EBITDA surged 3.7x q-o-q and 33% y-o-y to INR 4,718 crores, which translates into an EBITDA per ton of INR .13,127 and an EBITDA margin of 29%.
• Tata Metaliks to merge with Tata Steel Long Products – Tata Steel will pursue simplification of its structure by clubbing its listed and unlisted subsidiaries in four clusters to improve efficiency, the statement said. The respective boards of the subsidiaries have approved a merger of Tata Metaliks Ltd and Indian Steel and Wire Products Ltd. into Tata Steel Long Products Ltd. The merger is expected to be completed in the next 6-9 months. Tata Metaliks has a steel capacity of 0.55 mn t, out of which 0.25 mn t is converted into DI pipes and 0.3 mn t into pig iron.
• Indian steel prices expected to remain supported on robust demand – India steel prices to remain supported by strong international prices, robust raw material prices, recovery in steel demand and tight supply situation. India steel demand continues to improve; supported by government spending on infrastructure, festive season and higher rural consumption on the back of good monsoon.
• Global raw material prices expected to remain soft – Coking coal prices remain soft on import curbs by China amid political tensions with Australia; expected to gradually increase with potential weather-related supply disruptions in Q4 FY’21.Seaborne iron ore prices are expected to soften with improvement in supply;demand from China remains stable with strong steel production

Commenting on the quarterly results, TV Narendran, CEO & Managing Director of the company said, “Tata Steel has delivered strong results in India with broad based, market-leading volume growth and strong cashflow generation. The resilience of our business model and the commitment of our teams has enabled us to ramp-up capacity utilisation to normal levels and achieve highest ever sales despite the ongoing challenges due to the Covid pandemic.”