With global steel prices nosediving while production costs rise, Tata Steel, the country’s largest private steel maker, reported net profit of ₹702 crore in the June 2019 quarter, falling 63% year-on-year. The company had reported consolidated net profit of ₹1934 crore in the year-ago period.
Poor industrial sentiment overseas and with Tata Steel recently announcing its failure to sell its European assets weighed down on earnings. Consolidated revenue from operations remained flat in the quarter, at ₹35,382.16 crore.
For India, the company reported standalone net profit of ₹1567 crore, 15% lower than the ₹1856 crore it reported last year. “In India, steel prices declined as subdued economic activity, seasonal slowdown and liquidity issues weighed on domestic consumption. Higher net imports further exacerbated the demand supply balance," the company said in a press release.
On Tuesday, Tata Steel said it had abandoned plans to sell its Southeast Asian assets to China’s HBIS group. On Wednesday, the company said it has executed a memorandum of understanding to divest 70% of its stake in Tata Steel Thailand to Synergy Metals and Mining Fund, a Dubai-based private equity fund. “As a next step, Synergy will carry out confirmatory due diligence and both parties shall engage to complete the definitive agreements in an expeditious manner."
The company reported production of 7.15 million tonnes (mt) in the quarter, with India accounting for 4.5 mt, higher than the 6.45 mt and 3.64 mt respectively reported in the same period last year. EBITDA in its India business fell 4.71% to ₹5117 crore in the quarter, from ₹5370 crore in Q1FY19. EBITDA/tonne of steel fell to ₹12,908 from ₹16,068 in the quarter, while for the consolidated figures crashed from ₹11,740 to ₹8725 crore.
TV Narendran, CEO & MD, Tata Steel, said: “The steel sector is facing significant headwinds which has affected spreads and overall profitability. However, our strong business model in India has helped us counter the overall market weakness, including the slowdown in the automotive sector, by growing volumes in multiple customer segments…While Tata Steel Europe’s performance has been affected by market and operational issues, we are implementing a transformation plan which aims to reduce operating costs, rationalise capital expenditure and working capital and improve overall cashflows.
We are consolidating our presence in India through the proposed merger of Tata Steel BSL (erstwhile Bhushan Steel) with Tata Steel and our ongoing 5 mtpa Kalinganagar Phase II expansion, which will improve our product mix and further rationalize costs. Tata Sponge is focused on the integration and ramp-up of the recently acquired 1 mtpa steel business."