Tata Steel Q1 net profit plummets 63% as demand, prices fall

Tata Steel, the country’s largest private steel maker, reported a 63 per cent year-on-year fall in its fiscal first quarter net profit at Rs702 crore. The company had reported consolidated net profit of Rs1,934 crore in the year-ago period.

Tat Steel attributed this to poor industrial sentiment overseas, aggravated by the company’s failure to sell its European assets. Consolidated revenue from operations remained flat in the quarter, at Rs35,382.16 crore.

Tata Steel reported standalone net profit of Rs1,567 crore, 15 per cent lower than the Rs1,856 crore it reported last year. “In India, steel prices declined as subdued economic activity, seasonal slowdown and liquidity issues weighed on domestic consumption. Higher net imports further exacerbated the demand supply balance," the company said in a press release.

On Tuesday, Tata Steel said it had abandoned plans to sell its Southeast Asian assets to China’s HBIS group. On Wednesday, the company said it has executed a memorandum of understanding to divest 70 per cent of its stake in Tata Steel Thailand to Synergy Metals and Mining Fund, a Dubai-based private equity fund. 

“As a next step, Synergy will carry out confirmatory due diligence and both parties shall engage to complete the definitive agreements in an expeditious manner."

The company reported production of 7.15 million tonnes in the quarter, with India accounting for 4.5 million tonnes, compared to the 6.45 million tonnes and 3.64 million tonnes, respectively, reported in the same period last year. 

EBITDA in its India business fell 4.71 per cent to Rs5,117 crore in the quarter, from Rs5,370 crore in Q1FY19. EBITDA/tonne of steel fell to Rs12,908 from Rs16,068 in the quarter, while for the consolidated figures crashed from Rs11,740 to Rs8725 crore.

“The steel sector is facing significant headwinds which has affected spreads and overall profitability. However, our strong business model in India has helped us counter the overall market weakness, including the slowdown in the automotive sector, by growing volumes in multiple customer segments…While Tata Steel Europe’s performance has been affected by market and operational issues, we are implementing a transformation plan which aims to reduce operating costs, rationalise capital expenditure and working capital and improve overall cashflows,” TV Narendran, CEO and MD, Tata Steel, said.

“We are consolidating our presence in India through the proposed merger of Tata Steel BSL (erstwhile Bhushan Steel) with Tata Steel and our ongoing 5 mtpa Kalinganagar Phase II expansion, which will improve our product mix and further rationalize costs. Tata Sponge is focused on the integration and ramp-up of the recently acquired 1 mtpa steel business," he added.