Tata Steel swings to loss in September quarter

Hurt by weak UK operations, Tata Steel reports Rs49.38 crore loss

T.V. Narendran, managing director of Tata Steel India and South-East Asia.
T.V. Narendran, managing director of Tata Steel India and South-East Asia.

Mumbai: Tata Steel Ltd on Friday said it swung to a loss in the quarter ended 30 September, hurt by weak operations in the United Kingdom.

The steel maker reported a consolidated net loss of Rs49.38 crore for the quarter, compared with a net profit of Rs5,609.43 crore a year ago. Net sales edged up 0.2% to Rs27,392.06 crore from Rs27,339.37 crore a year earlier.

Fifteen analysts polled by Bloomberg had expected Tata Steel to report a consolidated net profit of Rs712.3 crore, while 16 analysts had expected sales of Rs27,334.70 crore.

India business revenue rose 10.1% to Rs11,718.31 crore. Revenue at Tata Steel Europe fell 13.7% to Rs12,357.69 crore. Finance costs in the quarter rose 22.8% to Rs1,351.06 crore.

The company said that its deliveries in the September quarter stood at 5.65 million tonnes.

Tata Steel has been grappling with rising shipments from China, where an economic slowdown has depressed demand and put steel prices under pressure.

Over the past year, Tata Steel has cut jobs and shuttered some of its plants in Europe, blaming cheap Chinese imports, a strong pound and high costs for its decision.

Tata Sons Ltd’s ousted chairman Cyrus Mistry had played a key role in discussions about merging Tata Steel’s European operations with those of Thyssenkrupp AG. Tata Steel said it is still involved in discussions with the German company for a potential joint venture and that the process of selling Tata Steel UK’s speciality steels business and its Hartlepool pipe mills are ongoing.

“Tata Steel UK is deeply engaged with all relevant stakeholders in the UK including the unions, the pension trustees and the pension regulators to find a structural solution and a way forward with regards to the affordability of the legacy pension scheme liabilities. Discussions are currently ongoing,” the company said in a statement.

“Strong monsoons affected steel demand across the country while the increase in domestic capacity added to the competitive pressure... There was a sharp drop in realizations which coupled with the ramp-up costs at the Kalinganagar plant kept margins under pressure. While realizations have since improved, rising coal prices will affect margins in the short run and will necessitate increase in steel realizations going forward,” said T.V. Narendran, managing director of Tata Steel India and South-East Asia.

In March, Tata Steel decided to put its entire UK business on the block in the face of a slump in steel demand and prices, but the plan hit a roadblock due to uncertainty stemming from Britain’s decision to exit the European Union.

The group eventually halted the sale process in July in favour of discussions for a joint venture with “strategic players” in the steel industry, including Thyssenkrupp.

As of 30 September, Tata Steel’s net debt stood at Rs75,563 crore.

“Overall numbers were below expectations. India business was weak due to Kalinganagar impacting the overall mix and the Europe margin rise was not as expected. The other divisions also did not perform well. For the next two-thirds quarters, Kalinganagar will continue to impact negatively. The spat with Cyrus Mistry did not come up on the post-results call with management, but this is likely to hurt all Tata group company stocks,” said an analyst, asking not to be named as he is not authorized to speak to the media.

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