Tata Steel net loss widens tenfold to Rs3,183 crore

Tata Steel attributes the loss to a write-down in the value of some of its European assets because of a global supply glut that has sent prices plunging


The company said in a statement that net profit from continuing operations (excluding Long Steel UK) was <span class='WebRupee'>Rs.</span>172 crore compared to <span class='WebRupee'>Rs.</span>22 crore a year ago. Photo: Bloomberg
The company said in a statement that net profit from continuing operations (excluding Long Steel UK) was Rs.172 crore compared to Rs.22 crore a year ago. Photo: Bloomberg

Mumbai: Tata Steel Ltd’s consolidated loss widened to Rs3,183 crore in the June quarter from Rs317 crore a year ago as India’s largest steel maker had to account for the divestment of its Long Steel UK Ltd factory.

Consolidated revenue fell 5.7% to Rs26,406.10 crore in the quarter from Rs28,025.43 crore in the year-ago period.

The earnings lagged estimates. A Bloomberg poll of analysts had projected a net profit of Rs376.9 crore on consolidated net sales of Rs28,468 crore.

The company said in a statement that net profit from continuing operations (excluding Long Steel UK) was Rs172 crore compared to Rs22 crore a year ago.

Tata Steel attributed the loss to a write-down in the value of some of its European assets because of a global supply glut that has sent prices plunging.

Improved operating performance of entities across India, Europe and South-East Asia offered a silver lining. Consolidated earnings before interest, tax, depreciation and amortisation (Ebitda)—an indicator of operating profitability—rose 21.4% year-on-year to Rs3,270 crore.

Koushik Chatterjee, group executive director (finance and corporate), said “internal restructuring which includes rightsizing and closures” and an improved product mix had started yielding benefits.

He, however, cautioned that the internal restructuring would have to continue for the company to stay competitive.

“The steel world structurally hasn’t changed and there’s significant oversupply,” said Chatterjee.

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In July, Tata Steel said it would seek a joint venture (JV) partner for its entire European business, putting on the backburner the sale of its UK assets, plans for which ran into a roadblock due to Britain’s referendum vote to exit the European Union.

Tata Steel had said it was in talks with potential partners including Thyssenkrupp AG.

On the company’s European business plans and a potential joint venture, Chatterjee said Tata Steel remains in talks with various firms. Tata Steel’s UK pension liabilities are a problem.

“We need more time,” said Chatterjee. “There are complications related to pensions.”

Profit at the India business of Tata Steel rose 35.3% to Rs575.43 crore in the June quarter and revenue increased 1.5% to Rs10,323.5 crore from a year ago. The Ebitda margin of the standalone entity widened to 22% from 19.5% in the March quarter.

An improved product mix, strong growth in demand from the auto sector and regulatory intervention like the minimum import duty helped, said T.V. Narendran, managing director of Tata Steel India and South-East Asia.

Stronger price realization and focus on the value-added products too boosted margins.

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Goutam Chakraborty, an analyst at Emkay Global Financial Services Ltd, said Tata Steel had delivered a “very strong operational performance.”

He is doubtful the company will be able to sustain the performance given the volatility in the European steel market and the fact that currency benefits are short-term in nature.

On Monday, Tata Steel shares fell 5.7% to Rs373.60 on the BSE on a day benchmark Sensex dropped 1.54% to 28,353.54 points.

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