Tata Steel declines as net loss increases in Q1

Tata Steel dropped 0.32% to Rs 372.40 at 9:25 IST on BSE after the company reported net loss of Rs 3183.07 crore in Q1 June 2016, higher than net loss of Rs 316.91 crore in Q1 June 2015.

The result was announced after market hours on Monday, 12 September 2016. Stock market remained closed on Tuesday, 13 September 2016 on account of holiday.

Meanwhile, the S&P BSE Sensex was up 43.66 points or 0.15% at 28,397.20.

On BSE, so far 55,952 shares were traded in the counter as against average daily volume of 9.64 lakh shares in the past one quarter. The stock hit a high of Rs 377.75 and a low of Rs 368 so far during the day.

Tata Steel's total income fell 5.5% to Rs 26542.83 crore in Q1 June 2016 over Q1 June 2015. Tata Steel's consolidated earnings before interest, taxation, depreciation and amortization (EBITDA) rose 21% to Rs 3270 crore in Q1 June 2016 over Q1 June 2015 due to improved operating performance across India, Europe, and South East Asia. EBITDA margin expanded to 12.4% in Q1 June 2016 from 9.6% in Q1 June 2015. Tata Steel said that the company recognised loss of Rs 3296 crore in Q1 June 2016 on account of divestment of Long Steel UK Limited.

In its business outlook for Indian business operations, Tata Steel said that India realisations in Q2 September 2016 are expected to be affected by lower demand from large steel consuming sectors such as construction and capital goods as well as seasonal sluggishness due to monsoon. Demand is expected to pick up post-monsoon and the festive season on the back of increase in disposable income due to the Pay Commission award, good harvest and easier liquidity, Tata Steel said. Supply side pressures from domestic steel companies likely to cap realisations and keep industry mill utilisation levels under check, the company said.

In its business outlook for European business operations, Tata Steel said that European Union economy is expected to continue to grow gradually though UK's stronger growth may slow down following the referendum result. Supply pressures from imports are expected to continue. The weaker pound is expected to improve UK's short term competitive position on exports, however it will add cost pressure due to higher cost of raw materials purchased in US dollars, Tata Steel said.

In its business outlook for South East Asia busines, Tata Steel said that steel demand is expected to be stable on the back of infrastructure building. Margins will remain under pressure as China's slowing growth and overcapacity is expected to result in continued exports to global markets, particularly South East Asia.

Tata Steel said that while iron ore prices have been volatile, coking coal prices have surged upwards by almost 60% since the start of August 2016. Prices of iron ore and coking coal are expected to remain volatile, the company said.

T V Narendran, Managing Director of Tata Steel India and South East Asia, said that seasonal headwinds and a slowdown in a large steel consuming sector like real estate affected steel demand in Q1 June 2016. While the regulatory changes have helped stem the flood of imports, domestic supply has increased and added to the competitive pressure, Narendran said. Tata Steel Kalinganagar commenced commercial production during Q1 June 2016 and the plant is ramping up well both in terms of output and quality, he said. Despite continued imports from China, the South East Asia operations have shown a significant improvement in the business due to the focus on downstream products and solutions, exports and effective management of spreads, he added.

Tata Steel is Europe's second largest steel producer, with steelmaking in the UK and Netherlands, and manufacturing plants across Europe. The combined Tata Steel group is one of the world's largest steel producers.

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