Tata Steel slips after weak Q3 performance

On a consolidated basis, Tata Steel reported a net loss of Rs 1084.62 crore in Q3 December 2019 (Q3 FY20) as against a net profit of Rs 2283.98 crore in Q3 December 2018 (Q3 FY19).

Shares of the steel major fell 5.36% to Rs 445.70. It traded in the range of Rs 445.55 and Rs 465 so far in early trade.

Net sales declined 8.7% to Rs 34774.29 crore in Q3 FY20 as against Rs 38086.29 crore reported in the same period last year.

Pre-tax loss in the December quarter stood at Rs 607.49 crore. The company had reported a pre-tax profit of Rs 3159.72 crore in Q3 FY19.

Consolidated EBITDA fell 45.60% year-on-year (YoY) to Rs 3,659 crore in Q3 FY20.

Tata Steel's India's EBITDA per ton stood at Rs 8,484 (down 41.16% YoY) while the consolidated EBITDA per ton stood at Rs 5003 (down 51.91% YoY) in Q3 FY20.

On business environment, the company said that during 33 FY20, global economic growth further slowed down amidst heightened concerns of a US-China trade war. Regional steel prices were down as steel demand was affected by weaker industrial output in key markets. However, Chinese apparent steel consumption remained steady and steel exports stabilized below 5 million tons a month.

In Europe, the overall slowdown was more pronounced due to seasonal weakness and elevated levels of unfairly priced imports. Gross spot spread dropped sharply as benefit of softness in raw material prices was offset by steep decline in steel prices with Hot Rolled Coil with (HRC) prices dropping below $470/ ton levels.

The Indian economy remained weak during the quarter and domestic steel prices reached a nadir in October 2019. However, steel prices are on an upward trend since November with inventory rationalization and increase in government spending. Market sentiments have improved as recent PMI manufacturing and bank credit growth data suggest pick-up in activity levels ahead.

Consolidated steel production stood at 6.99 million tons while deliveries grew by 12% quarter-on-quarter (QoQ) to 7.31 million tons. India steel production stood at 4.47 million tons. India deliveries jumped 17% QoQ to 4.85 million tons and contributed about 66% of consolidated deliveries.

T V Narendran, CEO & managing director: "Tata Steel delivered strong growth in volumes despite poor macroeconomic conditions in India as well as globally. In India, our business model helped us counter the slowdown as we successfully penetrated new markets and expanded our customer universe. We were also able to maintain our sales to the auto segment despite the sluggishness faced by the auto industry. Both our acquisitions, Tata Steel BSL and Tata Steel Long Products, continue to deliver operational improvements and achieve milestones in the market place. However, our European operations made a loss as it felt the brunt of the overall slowdown and the consequent shrinking of spreads. This adversely affected our consolidated performance.

Our Kalinganagar Phase II expansion is progressing well and we expect to commission the pellet plant and our Cold Rolling Mill facility by FY21. We have recently won chrome ore blocks which will enable us to service our existing ferro chrome customers.

Steel demand in India is expected to improve on the back of increasing government spending and a revival in the broader economy. Coronavirus does pose a risk and we are closely monitoring the fallout."

Tata Steel Group is among the top global steel companies with an annual crude steel capacity of 33 million tonnes per annum (MnTPA). It is one of the world's most geographically-diversified steel producers, with operations and commercial presence across the world.

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