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Tata Steel, the country's oldest steel producer, reported a consolidated loss of Rs 5,674 crore in the March quarter due to a sharp fall in revenue and also because of a non-cash impairment of Rs 4,951 crore it took, most of it on Europe's long products division.
By Bloomberg estimate, the expected profit has Rs 204 crore in the period. Consolidated revenues tumbled 21 per cent on a year-on-year basis to Rs 33,666 crore in Q4 and came in lower than the Bloomberg consensus estimate of Rs 34,349 crore.
"Company's performance was impacted by surging imports from China and Korea, declining commodity prices and muted demand," Koushik Chatterjee, group executive director (finance and corporate), said at the post earnings conference.
Even if one were to exclude the exceptional items and consider performance at the operating level, it was a disappointment. Bloomberg consensus estimates had put the earnings before interest, taxes, depreciation and amortisation (Ebidta) at Rs 3,089 crore and standalone Ebidta at Rs 2,204 crore. The actual numbers came in at Rs 1,580 crore and Rs 1,661 crore, respectively.
The Indian and south-east Asian operations suffered and proved to be drag, while Tata Steel Europe did well with its Ebida rising to £112 million compared to £81 million in the year-ago quarter. South-east Asia reported a loss of Rs 232 crore at the Ebidta level in the March quarter against a profit of Rs 80 crore in the year-ago period.
The company's India performance disappointed as realisations at about Rs 42,920 a tonne declined from Rs 45,360 a tonne in the previous quarter. On a year-on-year basis realisations were down by a bigger margin. With lower realisations, the company's high-cost inventory of iron-ore dented the operating performance further. Most other costs were up during the quarter. Thus, the Ebidta-per-tonne at about $110 was much lower than $276 in the year-ago quarter and $150 in the December 2014 quarter.
For European operations, the volumes and realisation-per-tonne were at 3.81 mt and $824, respectively, though were marginally lower than analyst estimates of 4.1 mt and $846. The operating performance, though benign, was in line with street expectations. Goutam Chakraborty at Emkay Global said that Ebidta per tonne at $44-45 was in line with the expectations. The company had reported an Ebidta per tonne of $49.1 in the December 2014 quarter.
The Ebitda-per-tonne at the group level contracted to Rs 2,237 in the period under review from Rs 6,449 a year ago. Sequentially, too, it was lower than Rs 4,905 in the December 2014 quarter. Moving forward, the challenges are likely to persist.
While realisations are under stress, the company's Indian operations can still see soft operating performance in June 2015 quarter, too, looking at about 1.5 MT of high priced iron-ore inventory that still exists.
Regarding its 3MT Kalinganagar project, the company said that all its clearances are now in place and production will commission in the second half of current fiscal.
"The plant will increase production capacity, widen the product portfolio and diversify the customer base," said the company. "We plan to cater to the oil and gas segment once Kalinganagar comes up," informed TV Narendran, managing director of Tata Steel India and south-east Asia.
Updating on its plans to sell long products division in Europe, the management said discussions are on and the outcome is expected in next two months.
Rahul Dholam at Angel Broking said that company's FY16 capex is expected to reduce by 20 per cent against Rs 13,492 crore in FY15. The stock closed 1.85 per cent lower at Rs 361.35 on Wednesday. The consensus target price for the stock stands at Rs 400 as per 11 analysts polled on Bloomberg during May 2015 but prior to declaration of result. Since the results came post closing of market hours, expect the stock to react sharply in Thursday's opening trade.
