Imports weigh on Tata Steel Q2 net, even as European losses narrow

Mumbai: Tata Steel made less money for every tonne of steel it sold in India during the July-September quarter compared to last year, in line with the performance of its domestic peers, as steel prices during the quarter remained subdued due to competition from cheap imports.

While the company’s European operations continued to bleed, losses in the UK narrowed and its Netherlands unit broke even, helping the company’s consolidated performance.

The company reported a consolidated profit of ₹759 crore for the quarter compared to a ₹6,511 crore loss in the corresponding period last year. It had taken an impairment of ₹6,899 crore during the July-September quarter last year on account of restructuring costs at its ailing UK unit.

The consolidated revenue for the quarter stood at ₹53,905 crore, 3% lower year-on-year. The topline was hit due to lower realizations in India, with India revenue dipping 5% year-on-year to ₹32,399 crore.

“Macro-economic conditions in China continued to weigh on commodity prices including steel. In India, steel demand continued to improve but domestic prices were under pressure due to cheap imports,” T. V. Narendran, the company’s managing director, said in a press statement.

On the brighter side, the company sold about 6% more steel during the quarter on a consolidated basis—about 7.52 million tonnes. The sales growth is expected to continue given a brighter domestic demand outlook and the company’s capacity expansion.

During September, the company inaugurated a new blast furnace at its Kalinganagar unit in India, which is touted to be the largest blast furnace in the country. Around the same time, it closed its second blast furnace at its Port Talbot unit in Wales. This was the last blast furnace in the UK, ending the production of virgin steel in the country.

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Higher volumes in India

Consolidated earnings before interest, tax, depreciation and amortization (Ebitda) during the quarter expanded more than half year-on-year to ₹6,142 crore.

Ebitda in India was marginally lower than the previous year at ₹6,912 crore. Tata Steel Europe reported an Ebitda loss of ₹1,344 crore compared to a loss of ₹2,512 crore during the same period last year.

“Consolidated Ebitda margin witnessed an improvement of around 300 bps to 12%, aided by higher volumes in India and improved profitability at Netherlands. This was despite challenging operating environment across geographies,” said Koushik Chatterjee, the company’s chief financial officer.

Ebitda per tonne in India declined 6% to ₹13,524. Consolidated Ebitda per tonne improved 36% to ₹8,278.

Tata Steel marched ahead with its capacity expansion efforts on full steam during the quarter. While its second blast furnace at Kalinganagar is already ramping up, associated downstream facilities will be commissioned in the later part of the year, Chatterjee said. 

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The company also placed equipment orders for a 0.85 million tonnes per annum electric arc furnace, for its unit planned in Ludhiana. For its UK unit too it has signed a contract with Italy’s Tenova to deliver an electric arc furnace, he said.

Tata Steel spent ₹8,583 crore on capital expenditure during the half year, mostly in India, the CFO further said.

Tata Steel’s consolidated net debt stood at ₹88,817 crore at the end of September with a group liquidity position of ₹26,028 crore, with cash and cash equivalents of ₹10,575 crore.

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