Tata Metaliks slumps as Q1 PAT drops 99% YoY

Tata Metaliks tumbled 6.97% to Rs 653.40 after the company's net profit dropped 98.7% to Rs 1.22 crore on 10.5% increase in net sales to Rs 666.37 crore in Q1 FY23 over Q1 FY22.

Profit before tax and exceptional items fell 98.7% year on year to Rs 1.73 crore in Q1 FY23. EBITDA fell 82.73% to Rs 27.11 crore in Q1 FY23 as against Rs 156.99 crore in Q1 FY22.

Total expense jumped 42.8% to Rs 642.23 crore in Q1 FY23 over Q1 FY22, due to an increase in raw material costs (up 64.2% YoY).

During the quarter, the company's revenue from Pig Iron segment rose 14.95% to Rs 597.09 crore and revenue from Ductile Iron Pipe segment rose 23.11% to Rs 277.66 crore over the same quarter last year.

 

Revenue for the quarter saw an increase of 11% YoY over Q1 FY22 driven by increased realization of both Pig Iron and DI Pipe by 36 to 40%. However, sales volume of Pig Iron & DI Pipe were lower by 23% & 8% respectively on a YoY basis owing primarily to softening of market sentiment of Pig Iron from mid-May onwards. Pig Iron prices also witnessed a sharp drop in market prices after imposition of export duty by the Government on 22 May 2022. On the raw materials front, coal and coke prices moved up significantly (coke price was up 30% over Q4). Profitability was severely impacted in the quarter owing to the above factors.

Sandeep Kumar, managing director of Tata Metaliks said, "While DIP business has delivered close to its planned volumes, the Pig Iron business got adversely impacted due to lower production & higher cost arising out of the annual maintenance shutdowns and also on account of operational issues in one of the blast furnaces for much of April and May. Significant increase in coal, coke & consumable prices, continuing drag of old orders (booked in FY21) of DI Pipe and a sharp drop in Pig Iron prices post imposition of 15% export duty on Pig Iron have severely dented our profitability this quarter.

The Pig Iron market has stabilized and has shown a slight upward trend since the beginning of July. Coal prices have dropped significantly with Prime hard coking coal having come down from $500/t free on board (FOB) average in May to below $300/t average in July. All these factors present a positive outlook for Pig Iron business in Q2. Government's increased investment in water infrastructure is expected to keep the demand for DI Pipes robust, though Q2 is a seasonally weak quarter. Subsequent quarters are expected to be much better with demand of DI Pipe picking up and supported by additional volumes from the new DI Pipe plant."

Tata Metaliks, a subsidiary of Tata Steel, has its manufacturing facilities at Kharagpur, West Bengal, India which produces Pig Iron and Ductile Iron pipes. The plant annually produces around 600,000 tonnes of hot metal, out of which over 200,000 tonnes is converted into DI Pipes and the rest into Pig Iron.

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