Tata Steel slumps after reverse turnaround in Q2

Tata Steel lost 6.74% to Rs 398.10 at 14:05 IST on BSE after the company reported net loss of Rs 49.38 crore in Q2 September 2016, as against net profit of Rs 5609.43 crore in Q2 September 2015.

The result was announced after market hours on Friday, 11 November 2016. The stock markets were closed on Monday, 14 November 2016, for a public holiday.

Meanwhile, the S&P BSE Sensex was down 358.72 points or 1.34% at 26,460.10

On BSE, so far 6.66 lakh shares were traded in the counter as against average daily volume of 8.96 lakh shares in the past two weeks. The stock hit a high of Rs 417 and a low of Rs 394.15 so far during the day. The stock had hit a 52-week high of Rs 440.90 on 11 November 2016. The stock had hit a 52-week low of Rs 211.30 on 12 February 2016.

The large-cap company has equity capital of Rs 971.22 crore. Face value per share is Rs 10.

Tata Steel's total income declined 22.5% to Rs 26602.03 crore in Q2 September 2016 over Q2 September 2015. Other income dropped 97.09% to Rs 231.08 crore in Q2 September 2016 over Q2 September 2015.

Tata Steel's consolidated earnings before interest, taxation, depreciation and amortization (EBITDA) fell 8.5% to Rs 2992 crore in Q2 September 2016 over Q2 September 2015. The drop in margins was due to lower realisations in India and ramp-up costs of Kalinganagar. EBITDA rose 66% in Q2 September 2016 over Q2 September 2015 largely due to significant improvement in the operating performance at Tata Steel Europe.

In its outlook for Indian operations, Tata Steel said that a seasonal uptick in demand is expected to be backed by positive variables like 7th Pay Commission disbursements, good monsoons and penetration of organised financing in Tier 2/3 cities. The increase in tariff barriers globally on Chinese steel has opened exports opportunity for Indian steel players which will help the domestic demand supply balance . The recently announced demonetisation is expected to cause short term disruptions. For European operations, Tata Steel said that the European Union economy is expected to grow gradually though UK's growth has been revised downwards following the Brexit referendum result. European steel mills are expected to continue to be under pressure from imports. The weaker pound is expected to improve UK's short-term competitive position, however it will add cost pressure due to higher cost of raw materials purchased in US dollars. For South East Asian operations, Tata Steel said that steel demand in Thailand is expected to maintain its growth rate on the back of expanding government expenditure and progress on infrastructure investment plans. Demand in Singapore is expected to be subdued on continued slower construction sector growth and low downstream spreads. Increasing trade barriers on Chinese steel in countries like Malaysia, Vietnam provides export opportunities.

T V Narendran, Managing Director of Tata Steel India and South East Asia, said that the markets were challenging as strong monsoons affected steel demand across the country while the increase in domestic capacity added to the competitive pressure.

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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