Tata Steel reports consolidated net loss of ₹4,648 cr in Q1

India’s largest private steel producer Tata Steel posted a consolidated net loss of ₹4,648 crore in the June quarter due to lower production and sales in domestic and European markets. The company had reported a profit of ₹714 crore in the year-ago period.

Operating revenue fell 32% year-on-year to ₹23,812 crore, as sales fell 22% globally from 6.34 million tonnes (mt) in Q1FY20 to 4.93 mt in Q1FY21. Even though the company managed to bring down operating costs by 19% from the year-ago to ₹27,892 crore, its earnings before interest, tax, depreciation and amortisation fell to ₹597 crore in the quarter from ₹5,515 crore in Q1FY20.

Tata Steel’s India business posted net profit from continuing operations of ₹411 crore, compared to ₹1,570 crore in the year-ago period, even as Ebitda fell over 70% from ₹4,938 crore to ₹1,455 crore during the period.

The reported loss was more than double the market expectations. A Bloomberg poll of eight analysts had estimated the Q1 loss at ₹2,276.8 crore for the June quarter. Consolidated revenue came in line with market expectations of ₹23,542 crore.

The company said its operations recovered in July with capacity utilization returning to 90% by end June, and 95% since then. Tata Steel’s consolidated realizations were lower due to covid-19 and about ₹2,000 crore in costs were under absorbed due to lower volumes, and this was charged to the profit and loss account. Despite the drop in margins, there was a reduction in net debt of ₹1,677 crore for its India operations, including a reduction of ₹577 crore and ₹291 crore, respectively, for Tata Steel BSL and Tata Steel Long Products. Tata Steel Europe’s performance was affected with the overall weakness in economic activities and sharp drop in spreads. The company said it had received short support from the UK and Netherlands governments, including cash flow deferrals of payables, but it did not reveal details. To preserve cash flows and focus on capital allocation, the company has curtailed growth capital expenditure for this year and the focus is primarily on safety environment and sustenance of capital expenditure.

“During the quarter, we recalibrated our operations and our sales across geographies in line with underlying regulatory and market conditions. While this had an adverse impact on our volumes and our margins, we were successful in mitigating the impact as we pivoted the business towards export markets and successfully generated free cashflows despite adverse market conditions,” T.V. Narendran, CEO and MD, Tata Steel, said. “In Europe, spreads are at unsustainably low levels but are expected to improve going forward.”