Tata Steel

Last week itself, Tata Steel had warned us that things are not looking good in Q4 numbers and that is precisely what happened. The company, as stated, has recognized a non-cash write-down of the goodwill and assets in the consolidated financial results in Q4FY15 of Rs. 4476 crore, mainly relating to the Long Products UK business in Tata Steel Europe which will now be fully impaired. The impairment also includes a write down of investments in overseas raw materials projects in Mozambique ,Ivory Coast and Taconite project in Canada because the economic viability of these projects remains uncertain at the current level of commodity prices.

And the picture is darker for FY15 as apart from this impairment, the company, in Q1FY15 had undertaken a non-cash impairment charge of Rs. 1,577 cores towards its investment in the Mozambique Coal Project. The total impairment charge for FY15 is Rs.6052 crore. Naturally, this has hit the profit big time – the company ended FY15 with a consolidated net loss of Rs.3925 crore v/s profit of Rs.3595 crore in FY14. It ended Q4FY15 also on a bad note with a consolidated net loss of Rs.5674 crore v/s loss of Rs.68 crore in previous Q4 and profit of Rs.1036 crore in Q3Fy15.

But it is not impairment costs alone which have driven the performance down. Operationally too, things have been disappointing. Its consolidated net sales dropped 21% at Rs.33,337 crore and though costs were down 13% in absolute terms, as a percentage of revenue, it was at 99%. Thus EBITDA itself showed a stress – down 69% at Rs.1543 crore. And after interest charges, Profit before tax and exceptional item was a loss of Rs.1025 crore. The performance of its main fray, steel was very poor, with its EBIT margin slipping down from 9.97%  to 1.93% (YoY).

In terms of debt, its consolidated interest outgo for FY15 stood at Rs.4848 crore and debt (LT+ST Borrowings) stood at Rs.69,300 crore, which is huge to put it mildly. Meanwhile the company has slammed reports, clarifying that it has no immediate plans to sell-off its Long Products Europe business to the Switzerland-based Klesch Group.