Low global steel prices in the December quarter (Q3) sent Tata Steel Ltd into the red, with India’s largest private sector steelmaker reporting a consolidated net loss of ₹1,228.53 crore. It had reported a net profit of ₹1,753 crore in the year-ago period.
The company’s performance is likely to disappoint market participants when the bourses open on Monday; a Bloomberg poll of nine analysts had expected a net profit of ₹75.41 crore for the quarter.
Consolidated revenue fell 8.9% year-on-year to ₹35,520 crore during Q3, even though steel sales rose 13% to 7.31 million tonnes (mt) from 6.47 mt a year ago. Operating revenue (or earnings before interest, tax, depreciation and amortization, Ebitda) nearly halved to ₹3,659 crore in Q3, from ₹6,726 crore in the previous year, while Ebitda per tonne fell to ₹5,003 from ₹10,404 in Q3 FY19.
Even as global steel sales dragged the company into a loss, Tata Steel’s domestic performance during the quarter held firm, despite a tough operating environment. Net profit from India operations was ₹1,194 crore, down 47% year-on-year. Revenue fell 4.6% to ₹21,299 crore, even though steel sales rose 25% in the quarter to 4.85mt.
The company said branded products and retail segment volumes jumped 22% quarter-on-quarter, while the industrial product and projects segment registered a healthy 12% growth. “Despite the continued slowdown in automotive industry, the company successfully maintained its sales volumes in automotive and special products segment," it said in a statement.
Tata Steel said gross debt during the quarter was at ₹1.09 trillion, while net debt stood at ₹1.04 trillion, falling by ₹2,324 crore from the preceding quarter.
“The economy remained weak during the quarter and domestic steel prices reached a nadir in October 2019. However, steel prices are on an upward trend since November with inventory rationalisation and increase in government spending," said the company statement.
During the December quarter, global economic growth slowed amid heightened concern over the US-China trade war. “Regional steel prices were down as steel demand was affected by weaker industrial output in key markets. In Europe, the overall slowdown was more pronounced due to seasonal weakness and elevated levels of unfairly priced imports," it added.
In the press statement, T.V. Narendran, chief executive and managing director of the company, said: “Tata Steel delivered strong growth in volumes despite poor macroeconomic conditions in India, as well as globally."
“In India, our business model helped us counter the slowdown as we successfully penetrated new markets and expanded our customer universe. We were also able to maintain our sales to the auto segment despite the sluggishness faced by the auto industry," he added.
“Both our acquisitions, Tata Steel BSL and Tata Steel Long Products, continue to deliver operational improvements. However, our European operations made a loss as it felt the brunt of the overall slowdown. This adversely affected our consolidated performance," he said.