Quiver Quantitative - Tata Steel, a prominent steelmaker, has unveiled a surprising loss for the quarter, largely attributed to the underperformance of its European entities. The firm reported a substantial loss of 61.96 billion rupees ($744 million) in the quarter ending September, contrasting starkly with the 15.1 billion rupees profit it had posted a year ago. This decline caught analysts off-guard as they had projected a profit of 5.69 billion rupees for the period. The company's revenue also experienced a dip, decreasing by 7% from the previous year.
The European units of the Mumbai-headquartered giant have notably strained its financials. However, recent financial agreements with the UK government to rejuvenate its British operations have garnered positive reviews from various industry experts and rating agencies, including Moody’s Investors Service and Fitch Ratings. This collaboration, combined with a surge in consumption within India, holds the promise of bolstering Tata Steel's performance in the coming years.
In terms of financial specifics, Tata Steel has acknowledged the ramifications of their electric arc furnace-based decarbonization project and their UK restructuring endeavors. This resulted in an impairment charge of 27.46 billion rupees. Furthermore, an additional 36.12-billion-rupee charge was registered due to restructuring and other relevant provisions. Koushik Chatterjee, the company's Chief Financial Officer, articulated their revised steelmaking approach and mentioned the limited usage span of certain assets in Tata Steel UK.
In the realm of production, the European sector of Tata Steel witnessed a 17% drop in production during the July-September quarter compared to the same timeframe a year ago. European sales fell by nearly 13%. On the flip side, the Indian division reported a 4% growth in crude steel output, albeit with a slight 1.8% sales reduction. With Moody’s predicting a 7% annual steel demand increase in India until 2030, powered by infrastructure and auto sector consumption, the company's future credit profile appears promising. Before these quarterly outcomes were announced, Tata Steel's shares in Mumbai saw a 1.8% decline.
This article was originally published on Quiver Quantitative