Tata Steel stock dips as co posts highest quarterly loss in Q2 at ₹6,511 cr

Tata Steel shares opened gap down in the opening trade today as the steelmaker reported the highest quarterly consolidated loss in two fiscal years at ₹6,511 crore for the July-September quarter as compared to a profit worth ₹1,297 crore in the year-ago period.

Tata Steel is currently trading 0.69% down at ₹115.80 on the BSE, 14% down as compared to a one-year high of ₹134.85 touched on September 18, 2023. With this, Tata Steel's m-cap stands at ₹1.4 lakh crore.

The share price has seen a 15.41% jump in return in the past year while falling 2.31% in the year-to-date period. On a six-month and one-month basis, the stock has seen a 5.53% rise and an 8.98% fall, respectively.

The company, meanwhile, attributed ₹6,358 crore worth of impairment charge it incurred for a decarbonisation project at its Port Talbot plant in the UK for the net loss in Q2. In September, Tata Steel announced plans to invest in a state-of-the-art scrap based EAF (Electric Arc Furnace) at Port Talbot, UK at a cost of £1.25 billion, with a government grant of £500 million.

"Given our plans to change the processed route for steelmaking, the existing heavy-end assets at TSUK (Tata Steel UK) will only be used for a defined period. Accordingly, we have taken an impairment charge of ₹12,560 crores in the standalone financial statements. We have also taken a charge of ₹6,358 crores in consolidated financial statements in relation to the UK business," says Koushik Chatterjee, Executive Director and Chief Financial Officer, Tata Steel.

Consolidated revenues for the July–Sept quarter stood at ₹55,682 crore, down 7% as compared to ₹59,878 crore. EBITDA was recorded at ₹4,315 crore, down from ₹6,271 crore in the year-ago period, while the EBITDA margin was at 8%.

Tata Steel says it spent ₹4,553 crore on capital expenditure during the quarter and ₹8,642 crore for the half year. The 5 MTPA expansion at Kalinganagar and the 0.75 MTPA EAF project in Punjab are under implementation, the company adds.

The Tata Group company's net debt stood at ₹77,032 crore, while its group liquidity remained strong at ₹27,637 crore as of Q2 FY24. The company says it is now rated Investment grade by Standard & Poor’s and Moody’s.

TV Narendran, Chief Executive Officer & Managing Director, Tata Steel, says: “Tata Steel India delivered steady performance, with crude steel production of around 5 million tons. Domestic deliveries were up 6% YoY, despite renewed volatility and seasonal factors during the quarter."

He adds that moving to sustainability, Tata Steel remains committed to net zero by 2045. "... (we) have calibrated the decarbonisation of steelmaking as per the operating geography. In the UK, we plan to invest in a state-of-the-art scrap-based EAF with government support and this will enable the reduction of 50 million tons of direct carbon emissions over a decade."

Narendran says in India, too, Tata Steel is undertaking "multiple initiatives" ranging from scrap charging in blast furnaces to greening the power mix.

In India, revenue was recorded at 33,922 crore with an EBITDA of ₹6,841 crore, which translates into an EBITDA margin of 20%. The loss for the quarter was recorded at ₹8,854 crore as compared to net profit of ₹1,856 crore in the same quarter last year.

Crude steel production was around 5 million tonnes and was broadly similar on a QoQ basis but up 5% on a YoY basis. Deliveries at 4.82 million tonnes were marginally higher QoQ driven by a rise in domestic deliveries. Broad-based improvement was witnessed across key end-use segments despite seasonal factors.

Europe revenue was £1,812 million and EBITDA loss stood at £242 million, says Tata Steel, adding that its Liquid steel production was 1.95 million tons and the QoQ improvement was primarily driven by better operating efficiency in the Netherlands.

Deliveries stood at 1.81 million tons and were marginally lower due to subdued demand and the ongoing reline of one of the blast furnaces at Ijmuiden, which will be completed in 3Q FY2024, says Tata Steel.