Tata Steel Q1 profit plunges 64 per cent on lower realisation, higher costs

Our Bureau Mumbai | Updated on August 07, 2019

TV Narendran, Managing Director of Tata Steel   -  The Business Line

Steel sector facing significant headwinds that affected spreads, profitability, says MD

Tata Steel has reported 64 per cent fall in its consolidated June quarter net profit at ₹702 crore, against ₹1,934 crore logged in the same period last year, due to a sharp fall in realisation and higher raw material cost.

Income from operations was up marginally at ₹35,382 crore (₹35,106 crore). Overall operational cost increased to ₹34,459 crore (₹32,547 crore) as interest cost jumped to ₹1,806 crore (₹1,658 crore) besides sharp rally in raw material prices and pile-up of inventory.

The consolidated financials of the company does not include the performance of NatSteel Holdings and Tata Steel Thailand as it has been classified as asset for sale.

The company’s profit from India was down 33 per cent to ₹1,539 crore (₹2,318 crore) while income was down at ₹16,091 crore against ₹16,405 crore.

Consolidated EBITDA per tonne of the company was down 26 per cent to ₹8,725 against ₹11,740 logged in same period last year. EBITDA in India also dipped 20 per cent to ₹12,908 against ₹16,068.

Gross debt of the company was higher at ₹106,636 crore against ₹100,816 crore logged in the March quarter.

During the quarter, steel prices across geographies declined with weakening economic activities and uncertainty around the ongoing US-China trade conflict.

This coincided with a sharp rise in iron ore prices due to supply disruptions and elevated coking coal costs.

In India, steel prices declined as subdued economic activity, seasonal slowdown and liquidity issues weighed on domestic consumption, said the company.

Facing headwinds

TV Narendran, Managing Director, Tata Steel, said the steel sector is facing significant headwinds which has affected spreads and overall profitability. However, he said the government spending and efforts to address the liquidity crunch should help revive steel demand and prices in the second half of the year.

While Europe performance has been affected by market and operational issues, the company is implementing a transformation plan which aims to reduce operating costs, rationalise capex and working capital and improve overall cashflow.

Published on August 07, 2019

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