The Indian steel sector’s growth is likely to be stable despite the challenges posed by Russia-Ukraine war or the high inflation impacting input costs, said N Chandrasekaran, chairman, Tata Steel.
“While there exist risks of high input costs, the growth of the Indian steel industry is likely to remain stable as domestic demand is expected to remain robust and global supply-demand dynamics may present export opportunities,” he said in the company’s annual report 2021-2022.
Tata Steel has had a good run in terms of financial performance during the financial year 2021-2022 as steel prices remained strong. “We demonstrated extraordinary resilience, agility and adaptability, which allowed us to record best-ever Ebitda performance despite continued uncertainties. The company was able to accelerate business restructuring, innovation and growth,” he said.
During the financial year, Tata Steel achieved its highest ever consolidated Ebitda of Rs 63,830 crore, doubling its growth over last year, translating into an Ebitda per tonne of Rs 21,626 and a healthy Ebitda margin of 26%. The company generated free cash flow of Rs 27,185 crore and reduced its net debt by 32% to Rs 51,049 crore during the year.
On the back of the strong performance, the company has announced its highest ever dividend payout of 510% per share, as the board of directors recommended a dividend of Rs 51 per fully paid up equity share and Rs 12.75 per partly paid-up equity share of the company. The board of directors has also recommended a sub-division of the equity shares in the ratio of 10:1.
However, Chandrasekaran observed that the ongoing geopolitical conflict, re-imposition of lockdown in China on account of fresh Covid-19 cases, global inflation and continuing supply shortages are expected to adversely impact global GDP growth in 2022. The war in Ukraine has triggered another crisis that has brought numerous other challenges in the form of strained geopolitical and trade relations, he added.
“The World Bank expects global growth to decelerate from an estimated 5.5% to 3.2%. Commodity and energy prices are expected to remain high in the wake of the conflict and sanctions, thereby resulting in an increase in global inflation,” he said.
Meanwhile, Tata Steel continued to accelerate its capex allocation for the 6 million tonne (mt) pellet plant which will be commissioned in Q3 FY23, followed by the 2.2-mt cold roll mill complex, along with the 5 mtpa expansion at Kalinganagar, which will drive cost savings and product mix enrichment.
Highlighting that the company has made progress in the new materials business, Chandrasekaran said the company is exploring composites, graphene and advanced ceramics as areas of growth. “Tata Steel has the objective to build its business in knowledge and intellectual property intensive and non-cyclical new materials. During the year, the company, through its subsidiary, started working towards building a world-class facility to produce medical materials with a focus on healthcare,” he said.
During the year, the company achieved a complete separation of its UK and Netherlands operations in October 2021. Under the new structure, Tata Steel UK and Tata Steel Netherlands will operate as two independent companies pursuing separate strategic paths.
He said Tata Steel will continue to invest significantly in new technologies for digital transformation. “The pandemic has acted as a catalyst for accelerating our digital transformation efforts across various spheres of our business. Towards this end, this year, we piloted digitising our factories by creating ‘Digital Twins’, a simulated digital replica of factories through real-time data analytics, thereby opening up possibilities for data-driven ‘Smart Factories’ in the future,” he said.
