Tata Steel posts ₹2,224 cr loss
3 min read . Updated: 06 Feb 2023, 11:47 PM IST
PremiumWeak European operations, one-off expenses take toll amid steep increase in energy costs
Tata Steel Ltd posted a net loss of ₹2,223.84 crore at the consolidated level in the December quarter, primarily due to a sharp drop in realizations and spreads in Europe. It missed the consensus analysts’ estimates of ₹1,699.10 crore.
Its European operations remained under pressure amid the steep rise in energy costs that affected demand as well as profitability for steel producers. Rising interest rates led to recession fears, following a further slowdown in the European economies.
“Recession concerns weighed on steel prices, which, coupled with elevated energy costs, affected our performance. Our deliveries were lower in 9MFY23 due to the slowdown in demand," Tata Steel chief executive officer and managing director T.V. Narendran said.
Tata Steel Europe posted an Ebitda loss of ₹1,551 crore compared to the ₹1,788 crore positive Ebitda in September quarter and ₹2,942 crore in the year ago. European revenues at ₹20,745 crore also fell 8.9% from a year earlier, and 3.8% sequentially. Ebitda stands for earnings before interest tax depreciation and amortization.
Its consolidated net profit was further impacted by a one-off expense associated with the European operations. On the positive side, the British Steel Pension Scheme with Tata Steel UK as sponsor has completed a substantial part of its de-risking journey with 60% of liabilities insured. The buy-in transaction and actuarial movements, however, also resulted in a non-cash deferred tax expense of ₹1,783 crore and increased the overall deferred tax expense for Q3 to ₹2,150 crore.
The company’s domestic business, however, was satisfactory. Indian steel manufacturers saw extraordinary gains during the year-ago led by high steel prices and softening raw material prices, but Q3FY23 saw steel prices declining as raw material prices rose. Sequentially, raw material costs however saw some respite.
Steel prices remained under pressure in Q3FY23 with a decline of 17% from a year ago, and 5% sequentially for flat products, according to Elara Securities analysts. Prices of long and semi-finished products were up 5% and 3% from the year ago, respectively, but fell 2% and 6% sequentially.
The company’s sales (standalone and Tata Steel long products) at 4.74 million tonnes were up 7% compared to January 2022, primarily driven by 11% growth in domestic deliveries.
“Domestic deliveries were up 11% yoy and grew at a faster pace than India apparent steel consumption, aiding in retaining market leadership position across chosen segments. Our crude steel production touched 5 million tonnes in Q3 for the first time in India, with Neelachal Ispat Nigam commencing operations," Narendran said. “We are expanding our capacities across multiple sites at Tata Steel Kalinganagar, Neelachal Ispat Nigam and the Electric Arc Furnace at Ludhiana, Punjab, and at our downstream plants across India."
The high domestic deliveries also enabled it to improve its product mix and cushioned the drop in revenues despite weak steel prices. Its standalone revenues, at ₹30,465 crore, fell 5.5% sequentially and 4.7% year-on-year. The per tonne profit at ₹10,379 however improved from ₹8,741 on falling input cost but was significantly lower than ₹28,631 in the year-ago.
“Tata Steel has delivered steady growth in India volumes despite the volatile operating environment," said Narendran
During the quarter, consolidated revenues from operations stood at ₹56,756.61 crores and earnings before interest tax depreciation and amortization (Ebitda) came ₹4,154 crores, with an EBITDA margin of 7%. The Bloom berg consensus estimates had pegged Ebitda at ₹5959 crore and revenues at ₹56689 Crore.
Koushik Chatterjee, Executive Director & Chief Financial Officer: said that“Global steel prices have witnessed steady moderation amidst inflationary pressures and concerns about economic slowdown in the first nine months of the financial year. Despite this, our consolidated revenues were up 3% YoY to ₹1,80,391 crores and EBITDA stood at ₹25,472 crores, which translates to an EBITDA margin of 14%.
Free cash flow generated for the quarter stood at ₹1,588 crores largely due to favourable movement in working capital as per Chatterjee.
The company spent ₹3,632 crores on capex during the quarter. At Kalinganagar, phased commissioning of 6 MTPA pellet plant has begun. Work on 2.2 MTPA Cold Roll Mill complex and 5 MTPA expansion is ongoing.
The company’s Net debt stood at Rs.71,706 crores, with Net Debt to EBITDA at 1.76x and Net Debt to Equity at 0.65x
