Tata Steel Q2 Results Preview: Net profit may fall sharply dragged by European operations; revenue seen down 6% YoY

Tata Steel Q2 Results Preview: Tata Steel will announce its financial results for the second quarter of FY24 today, November 1. The Tata group company is expected to report a sharp fall in profitability during the July-September quarter of FY24.

The overall steel sector is expected to report mixed performance in Q2FY24 due to reduced seasonal demand and lower average selling price (ASP), resulting from decreased ferrous prices. However, this decline will be partially offset by lower coking coal costs, analysts said.

Tata Steel Q2 earnings are likely to be weak with a single digit drop in revenue on a year-on-year basis. The company’s weak performance during the quarter is expected on the back of Tata Steel Europe which is estimated to report EBITDA losses due to poor volumes and realization.

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As per average analysts’ estimates, Tata Steel’s consolidated revenue in the quarter ended September 2023 is expected to fall 6% to ₹56,285 crore from ₹59,877.5 crore in the year-ago quarter.

Brokerage firm Motilal Oswal Financial Services expects Tata Steel’s Q2 net profit to decline sharply by 61.1% to ₹589 crore from ₹1,514.4 crore in the corresponding quarter of last fiscal. It expects the company’s revenue to fall 5.7% YoY to ₹56,464 crore.

At the operating level, Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) is seen falling 30% YoY to ₹4,242 crore.

“We await details on debt reduction and capex timeline, which will double the domestic capacity by FY30,” Motilal Oswal said.

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Kotak Institutional Equities expects Tata Steel to report a net loss of ₹151.9 crore during the quarter under review. It estimates sales to drop 4.6% YoY to ₹57,114.6 crore.

“We expect steel realizations to decline by 3.5% QoQ (flat YoY) on account of price cuts during the start of the quarter and lower exit price of previous quarter. We expect standalone volumes to decline by 2% YoY (1% QoQ) to 4.66 mn tons. India EBITDA/ton would increase by 3% QoQ to ₹14,481/ton (+78% YoY) led by lower coking coal costs, partly offset by lower realizations,” said the brokerage house.

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Kotak Institutional Equities estimates Europe to report an EBITDA loss of $142 per tonne (down $96 per tonne in Q1FY24) led by price weakness and higher fixed costs, partially offset by lower raw material costs.

Nuvama Institutional Equities estimates Tata Steel’s revenue and EBITDA to drop by 2% and 9%, respectively, on a year-on-year basis.

“Lower raw material cost is partially offset with lower realisation, while volume registered a marginal growth of 3%,” Nuvama Institutional Equities said.

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