Coronavirus lockdown measures drag Tata Steel's fourth quarter sales

Tata Steel India also achieved an eight per cent year-on-year production growth to 18.21 million tonnes for the full year FY20 along with best ever annual sales at 16.97 million tonnes

Logistic issues and lower demand due to lockdown measures in India resulted in lower sales for Tata Steel in the fourth quarter (Q4FY20).

The steel major recorded sales of 4.03 million tonnes, a 17 per cent drop from the previous quarter and 14.61 per cent in the same period last year. Tata Steel said that the lockdown led to logistic issues and lower demand, due by the shutdown of customer operations in automotive, construction and other segments since last few days of March 2020. Production volume was however up by 6 per cent to 4.74 million tonnes in the fourth quarter.

Tata Steel India also achieved an 8 per cent year-on-year production growth to 18.21 million tonnes for the full year FY20 along with best ever annual sales at 16.97 million tonnes. The company attributed it to the ramp up of Tata Steel BSL and the acquisition of Usha Martin's steel business by Tata Steel Long products. Tata Steel BSL also recorded its best ever annual performance, the company said.

Tata Steel India also witnessed the highest ever annual sales in branded products and retail segment with an increase of 8 per cent over FY19. The company was successful in maintaining volumes for industrial products and projects segment with a strong increase in sales in oil & gas an industrial pipe segment, the company said.  The share of high-end sales in automotive and special products segment also increased from 19.5 per cent in FY19 to 25 per cent in FY20.

The company, however, said that in view of the practical constraints in continuing operations, it was operating integrated steelmaking facilities at lower utilisation level while operations at downstream facilities had been suspended and put on care and maintenance mode. But Tata Steel has been able to continue with its mining operations normally.

The company also said that despite macro headwinds, Tata Steel Europe had been able to keep production and sales stable in the fourth quarter compared to the third quarter. Tata Steel Europe's fourth quarter sales were at 2.37 million tonnes compared to 2.35 in the previous quarter and 2.57 in the year ago period. Incidentally, Europe is not under lockdown.

Utilisation levels are currently around 70 per cent and dispatches are continuing in both UK and Netherlands. However, overall European steel demand has declined. Many customers, including European car manufacturers have currently paused production, Tata Steel said.

Edelweiss Research said, it expected performance to worsen in H1FY20 led by demand dip in domestic market, lower exports realisation and sustained weakness in domestic prices owing to destocking. "Furthermore, we expect TSE to make loss at operating level in FY21. We expect recovery only by Q4FY21," Edelweiss said.

Tata Steel said that in the unprecedented times and rapidly evolving situation its first and foremost priority was the health and safety of its employees. "While the company is focused on conserving cash and ensuring adequate liquidity, it continues to monitor the situation closely and has taken several initiatives to ensure that the operations are in a state of readiness to ramp back as the situation improves and normalcy is restored," it added.