Tata Steel
The company declared its numbers yesterday late evening and the reaction is there for all to see on today’s price. The numbers were BAD. The company posted a consolidated net loss of Rs.2127 crore for Q3FY16 against a profit of Rs157.11 crore reported in previous Q3. This was on a 16% (YoY) drop in net sales at Rs.28,039 crore.
This miserable performance to a large extent can be blamed on the industry dynamics which are very poor . Over the last year, global steel prices have declined sharply from around US$460/tonne to around US$260/t in line with the glut in supply and the sharp decline in raw material prices. Iron ore has dropped from around US$68/t to around US$40/t while coking coal has dropped from US$115/t to around US$80/t. Steel exports from countries such as China, Russia, Korea and Japan have surged to all-time highs on the back of lacklustre domestic demand, excess capacity and competitive currencies. Imports to India are now around 12 mtpa, with China being the largest exporter to India. Similarly, imports to Europe have increased to around 30mtpa million tonnes, with shipments from China surging by 57%. These unfairly priced imports are distorting the demand-supply balance in many regions, depressing domestic prices and undermining the profitability of many large steel producers.
The Indian business did well but it was the European unit which proved to be the drag. Q3 FY’16 turnover declined to Rs.16,344 crore v/s Rs.19,399 crore (YoY). Q3 FY16 EBITDA loss increased to Rs.675 crores largely due to the sharp deterioration of market spreads in Q3 FY’16 to €180 per tonne from €207 per tonne in Q2 FY16. This compares to the loss of Rs.238 crores in the previous quarter and gains of Rs.1,308 crores in Q3 FY15. There was also a impairment and restructuring charges of Rs.687 crores during the quarter.
Tata Steel’s net debt as at 31st Dec 2015 stands at a staggering Rs.75,118 crore. Cash and cash equivalent stands at Rs,10,500 crore.