Operating revenue fell 32% year-on-year to ₹23,812 crore as sales of steel globally fell 22% in the quarter from 6.34 million tonnes (mt) in Q1FY20 to 4.93 mt in Q1FY21
Mumbai: India’s largest private steel producer Tata Steel reported a consolidated net loss of ₹4648 crore in the June 2020 quarter, as the company’s financials took a body blow from lower steel production and sales in both its domestic and European markets. Tata Steel had reported a profit of ₹714 crore in the same period last year.
Operating revenue fell 32% year-on-year to ₹23,812 crore as sales of steel globally fell 22% in the quarter from 6.34 million tonnes (mt) in Q1FY20 to 4.93 mt in Q1FY21. Even though the company managed to bring down operating costs 19% year-on-year to ₹27,892 crore, the earnings before interest, tax, depreciation and amortisation fell to ₹597 crore this quarter, from ₹5515 crore the previous year.
Tata Steel’s India business reported net profit from continuing operations of ₹411 crore, compared to ₹1570 crore in the previous year, even as EBITDA fell over 70% through this period from ₹4938 crore to ₹1455 crore.
The reported loss was more than double market expectations. A Bloomberg poll of eight analysts had estimated the Q1 loss would be ₹2,276.8 crore for theJune ended quarter. The consolidated revenue came in line with the market expectation of ₹23,542 crore.
In a press release, the company said that its operations have recovered in the first month of the current quarter with capacity utilization returning to 90% by end June 2020 and 95% since then. The company said that its consolidated steel realisations were lower due to the covid-19 impact during the quarter and about ₹2,000 crore of costs were under absorbed due to the lower volumes and have been charged to the profit and loss account. Despite the drop in margins, there was a reduction in net debt of Rs.1,677 crores in India, including a reduction of ₹577 crores and ₹291 crores, respectively at Tata Steel BSL and Tata Steel Long Products.
Tata Steel Europe’s performance was affected with the overall weakness in economic activities in Europe and sharp drop in spreads, the company said. The company did receive short support from the UK and Netherlands Government including cash flow deferrals of payables, although it did not indicate how much. To preserve cash flows and focus on disciplined capital allocation, the company has curtailed growth capital expenditure for this year and the focus is primarily on safety environment and sustenance capital expenditure, the press release said.
“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," TV Narendran, CEO and MD, Tata Steel, said. “In Europe, spreads are at unsustainably low levels but are expected to improve going forward. We are also engaged with respective governments in UK and Netherlands for their support."
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