Expenses hit Tata Steel profit

Firm’s revenue rose by a marginal 1.3% to ₹35,497 crore

Tata Steel reported a 65% fall in its first quarter net profit to ₹683 crore on rising expenditure.

The fall in profit came on a marginal 1.3% increase in revenue to ₹35,497 crore as steel prices across geographies declined with weakening economic activities and uncertainty around the ongoing U.S.-China trade conflict.

Commenting on the results, T. V. Narendran, CEO and MD, Tata Steel, said, “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. Our focus on operational excellence has also helped in containing the impact on margins.”

The company is banking on increased government spending and efforts to address the liquidity crunch to revive demand and steel prices in India in the second half of the year.

The company’s adjusted EBITDA during the quarter fell by 21.7% to ₹5,530 crore.

Koushik Chatterjee, executive director and CFO, Tata Steel, said, “Amidst a very challenging global economic environment, including in India, higher input costs and weak demand conditions, Tata Steel reported a consolidated EBIDTA margin of 15.4% on the back of a robust India performance of EBIDTA margin of 24.2%.

“The European performance was impacted by shutdown and downtime in Netherlands. The U.K. operations had a stable performance post the major repairs of the blast furnace earlier in the year.”

The company is implementing a transformation plan to reduce operating costs, rationalise capital expenditure and working capital and improve overall cashflows.

“We are also working on capital release from special initiatives on working capital, portfolio consolidation and recalibration of capital expenditure for the year. Our liquidity is strong at over ₹12,000 crore,” Mr. Chatterjee added.

After the termination of the definitive agreement with HBIS Group to divest 70% stake in South-East Asia business, Tata Steel board on Wednesday approved the signing of a memorandum of understanding with Synergy Metals and Mining fund to divest 70% of its stake in Tata Steel Thailand in a 70:30 partnership for the Thailand business.

The company is consolidating its presence in India through the proposed merger of Tata Steel BSL with Tata Steel and its ongoing 5 MTPA Kalinganagar second phase expansion, which will improve the product mix and rationalize costs.

Tata Steel shares on BSE closed down 4.75% to ₹381.80 in a weak Mumbai market on Wednesday.

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Printable version | Jul 7, 2020 5:37:40 AM |

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