Tata Steel’s net profit declines in Q1 on the back of rising raw material costs

• Tata Steel’s revenues from operations rose by 18.6% to ₹63,430 crore in the June quarter of 2022.
• Net profit declined 12.83% to ₹7,764.96 crore in the June quarter.
• The company’s raw material cost higher by ₹6,446 crore

Tata Steel on Monday reported a sharp decline in its consolidated profit in the first quarter of fiscal year 2023, even as its revenues from operations rose by 18.6% to ₹63,430 crore. The company’s operational revenue stood at ₹53,465 crore last year in the same quarter.

On a sequential basis, the consolidated revenues have declined 8.5% from ₹69,324 crore during the previous quarter. However, its operating income increased on a per ton basis primarily due to market expansion in Europe.

“This has been a challenging quarter for the Global and Indian economy with rising interest rates, supply chain constraints and slowdown in China due to COVID. Despite these multiple headwinds, Tata Steel has delivered a strong performance with an improvement in margins," Tata Steel CEO and MD TV Narendran said.

	April-June 2022	January-March 2022	April-June 2021
Operational Revenue	₹63,430 crore	₹69,324 crore	₹53,465 crore
Net Profit	₹7,764.96 crore	₹8,907 crore	₹9,756 crore
EBITDA	₹15,047 crore	₹15,174 crore	₹16,185 crore

Tata Steel’s net profit stood at ₹7,764.96 crore for the June quarter, representing a decline of 12.83% compared to ₹8,907 crore posted in the same quarter last year. Its profit declined by 20% from ₹9,756 crore achieved during the January-March quarter this year.

This decline in profit comes on the back of rising cost of raw materials. The company’s raw material cost increased by over ₹11,000 crore, from ₹19,956 crore to ₹31,319 crore in a span of one year, even though the steel production declined marginally. The raw material cost grew by more than ₹6,000 crore compared to ₹24,873 crore three months ago.

Tata Steel, in its investors presentation, noted that the raw material cost “ increased primarily due to higher coking coal consumption cost across key entities”. The raw material cost stood at ₹19,956 crore in the June quarter of last year.

Its employee benefits expense actually declined from ₹1,723 crore in March quarter to ₹1,540 crore in the June quarter. Meanwhile, its other expenses have declined by ₹1,334 crore due lower power costs, consumption of stores and spares.

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