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Tata Steel Q1 profit misses estimates; key takeaways

India steel production grew by 23 per cent YoY to 4.50 million tonnes in Q1FY20.

ETMarkets.com|
Aug 07, 2019, 09.48 PM IST
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Mumbai: Tata Steel missed Street estimates as its consolidated profit in the June quarter fell to 64.5 per cent to Rs 683.13 crore from 1,922.85 crore a year ago, due to higher expenses. Analysts in an ET NOW poll had projected a net of Rs 1,424 crore.

Total revenues came in at Rs 35,947.11 crore, up marginally from Rs 35,846.92 crore a year ago.

Here are the key takeaways:

Margins dip
Consolidated margins dipped to 15 per cent from 17 per cent a year ago.

Decline in steel prices
During the quarter, steel prices across geographies declined with weakening economic activities and uncertainty around the ongoing US-China trade conflict, the company said adding that this coincided with a sharp rise in iron ore prices due to supply disruptions and elevated coking coal costs.

Drop in steel spreads
Steel spreads dropped by around US$ 80-100/ton in key markets, Tata Steel said in a release. In India, steel prices declined as subdued economic activity, seasonal slowdown and liquidity issues weighed on domestic consumption. Higher net imports further exacerbated the demand supply balance. In Europe, the steel industry faces significant headwinds in terms of lower economic growth, uncertainty around Brexit and the trade conflict. This coupled with rising share of imports and elevated raw material prices has led to a sharp decline in steel spreads.

Volume growth
In this business environment, the company delivered a 11 per cent yoy volume growth for production and 5 per cent yoy for deliveries, it said in the release.

Path Ahead
While TSE performance has been affected by market and operational issues, we are implementing a transformation plan which aims to reduce operating costs, rationalize capex and working capital and improve overall cashflows,” said T V Narendran , CEO and managing director, Tata Steel.

Indian operations post growth
India steel production grew by 23 per cent yoy to 4.50 million tons in 1QFY20 with consolidation of Tata Steel BSL for the full quarter and higher capacity utilization at both Tata Steel Standalone and Tata Steel BSL.

India' steel deliveries jumped 19 jumped yoy to 3.96 million tons in 1QFY20 as slowdown in the automotive sector was countered by higher sales in other segments.

India' revenues from operations for the year increased by 13 per cent yoy to Rs.21,129 crores driven by higher volumes. India' adjusted EBITDA for the quarter was Rs.5,117 crores.

European Operations subdued
During the quarter, Tata Steel Europe liquid steel production was impacted by planned shutdowns and unplanned outages. This coupled with sluggish demand adversely impacted delivery volumes.

Revenue from operations decreased to Rs.14,495 crores in 1QFY20 in line with lower deliveries.
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