KOLKATA: Tata Steel on Friday said its consolidated first quarter net profit grew three-fold aided mainly by one-time gains from sale of stakes in subsidiaries and in an Australian mining company.
The Jamshedpur-based steelmaker, which is ranked seventh largest in the world by capacity, posted a net profit of 5,346.6 crore, compared to 1,825.3 crore last year, according to a filing with the Bombay Stock Exchange.
Tata Steel's earnings announcement, which came during market hours, did nothing for the company shares, with the stock falling to its 52-week low on a day when the trading sentiment was weak. Tata Steel's stock fell 1.7% to 476.40 as investors worried about pressure on margins because of rising price of inputs and slow demand in key European markets.
On a standalone basis, the Indian unit of Tata Steel posted a net profit of 2,219.43 crore during the April-June quarter registering a 40.5% growth, compared with 1,579.4 crore in the same period last year. Net sales in the June quarter for the entire company rose 22% to 32,839.9 crore, which was in line with analyst expectations.
"The performance is stable and not unexpected, but going forward, there might be pressure on margins both in India and abroad due to high costs and unutilised capacity," said Ravindra Deshpande, an analyst with Elara Capital.
"For Tata Steel Europe, rising prices of iron ore and coking coal will affect margins, while for the Indian unit, coal will be a drawback."
Although Tata Steel owns iron ore mines, it buys half of its coking coal requirements. Tata Steel Europe, which accounts for 65% of the consolidated business buys iron ore and coking coal from the open market.
The one-time gains included sale of Tata Steel's investment in Riversdale Mining and in Tata Refractories, while a settlement of claims at Teesside Cast Products unit in the UK also helped the company post higher profits.
In its filing with BSE, Tata Steel said that during the April-June quarter it realised 4,942 crore by selling its 26.27% stake in the Australian mining firm Riversdale to Rio Tinto, a global mining giant.
Of this, it included 2,879.29 crore as one-time profit in the first quarter, the statement added. The company also made a profit of 511 crore by selling a 51% stake in Tata Refractories to Krosaki Harima Corporation, an associate of Japan's Nippon Steel, in May this year.