The steel major reported consolidated net loss of Rs 4,648.13 crore in Q1 June 2020 as against net profit of Rs 714.03 crore in Q1 June 2019.
Consolidated net sales slumped 32.7% to Rs 23,812.50 crore in Q1 June 2020 over Rs 35,382.16 crore in Q1 June 2019. Pre-tax loss stood at Rs 3,376.60 crore in Q1 June 2020 as against pre-tax profit of Rs 1,837.85 crore in Q1 June 2019. Current tax expense for the quarter tumbled 97.2% to Rs 26.62 crore as against Rs 950.37 crore in Q1 June 2019. The Q1 earnings were announced post trading hours yesterday, 13 August 2020.
Consolidated EBITDA dropped 89.17% to Rs 597 crore in Q1 FY21 as against Rs 5,515 crore in Q1 FY20. Exceptional items for Q1 June 2020 stood at Rs 58 crore as against Rs 16 crore in Q1 June 2019.
Tata Steel India and its key subsidiaries have countered the closure of the domestic market during the lockdown period by leveraging its global network and exporting more than 1.46 million tons during the quarter, limiting the decline in India steel deliveries to 27%Q-o-Q (quarter-on-quarter) as compared to the 55%Q-o-Q (quarter-on-quarter) drop in overall India steel demand.
Tata Steel's operating level has recovered to 90% by end June 2020 and has since then increased further to 95%, catering to both domestic and export customers. With the improvement in the domestic market, Tata Steel has been reducing its exports ratio. The price outlook in both export and domestic market continues to improve on month on month basis and the current quarter demand has been much better than a typically slow monsoon quarter in the past.
India average steel realizations were lower due to the COVID-19 impact during the quarter and about Rs 2,000 crores of costs were under absorbed due to the lower volumes and have been charged to the profit and loss account. Despite the drop in margins, there was a reduction in net debt of Rs 1,677 crore in India, including a reduction of Rs 577 crore and Rs 291 crore, respectively at Tata Steel BSL and Tata Steel Long Products.
Tata Steel Europe performance was affected with the overall weakness in economic activities in Europe and sharp drop in spreads. The company did receive short support from the UK and Netherlands Government including cash flow deferrals of payables. To preserve cash flows and focus on disciplined capital allocation, the company has curtailed growth capex for this year and the focus is primarily on safety environment and sustenance capital expenditure. In this uncertain economic environment, Tata Steel has built up a liquidity buffer of Rs 20,144 crore including Rs 14,178 crore of cash & cash equivalents.
T V Narendran, chief executive officer (CEO) & managing director (MD) of Tata Steel, has stated: "During the quarter, we recalibrated our operations and our sales across geographies in line with underlying regulatory and market conditions. While this had an adverse impact on our volumes and our margins, we were successful in mitigating the impact as we pivoted the business towards export markets and successfully generated free cashflows despite adverse market conditions."
"Economic activity is gradually recovering. In India, we have ramped-up our capacity utilizations to 90% levels with total sales in June exceeding FY20 average monthly sales. We are further ramping up capacity utilization and increasing domestic sales which will lead to an improvement in our margins in coming quarters. In Europe, spreads are at unsustainably low levels but are expected to improve going forward. We are also engaged with respective governments in UK and Netherlands for their support."
"While the risk of further COVID-19 outbreaks remains, we are cautiously optimistic that the worst is behind us. We continued to remain extremely focused on cashflows and liquidity management through this crisis," he added.
Shares of Tata Steel fell 0.12% at Rs 412.75 on BSE. Tata Steel group is among the top global steel companies with an annual crude steel capacity of 34 million tonnes per annum.
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