Comments
The Tata Steel stock closed over 5 per cent down on Monday after the company’s net loss multiplied 10-fold year-on-year to ₹3,183 crore in the June 2016 quarter. This includes loss of ₹3,297 crore on the sale of Tata Steel's long products business in Europe to Greybull Capital for a nominal amount.
The June 2016 quarter was also the eighth successive quarter of declining revenue for Tata Steel. The company's consolidated revenue of ₹26,406 crore was almost 6 per cent lower than that in the June 2015 quarter.
Not all gloomy
Despite this, Tata Steel expanded its operating profit 21 per cent to ₹3,242 crore. The improvement in operating performance was witnessed across geographies, including in India and Europe.
The operating profit (EBIDTA) per tonne, a key performance metric, rose 18 per cent to ₹10,455 for the Indian business during the June quarter. Higher sales of the company’s valued-added products, such as those supplied to the automobile sector, bumped up realisations. An uptick in global steel prices, which, in turn, supported domestic prices during the quarter, too helped. It was an even better show in Europe. The EBIDTA per tonne of steel tripled to ₹3,384 (year-on-year) after three successive loss-making periods since the September 2015 quarter. Here, depreciation of the pound, which made steel exports from the UK more competitive, provided relief. The impact of the business restructuring undertaken by the company in the early part of the year also benefited the European operations.
What’s ahead
Sluggish demand during the monsoon and excess domestic steel capacity is likely to keep realisations in the domestic market under pressure in the September 2016 quarter. Protection in the form of minimum import prices (MIP) and safeguard duties on steel imports should, however, provide support. With orders booked in the pre-MIP period continuing to come in during the June 2016 quarter, steel imports into India rose 9 per cent (year-on-year) in the quarter under review. But this was at a much slower pace compared to earlier. As regards Europe, while prices have looked up recently, the outlook remains uncertain, according to the company. That said, the divestment of the loss-making European units should help.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.