Tata Steel suffered a loss in the September quarter (Q2), hit by weak operations in UK. The company reported a consolidated net loss of Rs.49.38 cr for the quarter as compared to a net profit of Rs.5,609.43 cr a year-ago. The net sales edged up 0.2 per cent to Rs.27,392.06 cr from Rs.27,339.37 cr a year-ago.
Market analysts had expected Tata Steel to post a consolidated net profit of Rs.712.3 cr, while some analysts had expected sales of Rs.27,334.70 cr. India business revenue rose 10.1 per cent to Rs.11,718.31 cr. Revenue at Tata Steel Europe fell 13.7 per cent to Rs.12,357.69 cr. Finance costs in the quarter rose 22.8 per cent to Rs.1,351.06 cr. In the mean time, Tata Steel share price hit 52-week high and closed 2.53 per cent lower on the National Stock Exchange (NSE) on 11th Nov, 2016. On the same day, the stock had opened at Rs.432.50 as compared to a previous closing of Rs.437.
The steel maker has been grappling with increasing shipments from China, where an economic slowdown has reduced demand and put steel prices under pressure. In one year, Tata Steel has cut jobs and shuttered some of its European plants, putting the blame on cheap Chinese imports, strong pound and high costs for its decision.
Tata Sons’ ousted chairman Cyrus Mistry had played a vital role in discussions about merging Tata Steel’s European operations with Thyssenkrupp AG. Tata Steel stated that it was still involved in discussions with the German company for a potential JV – joint venture and that the process of selling off Tata Steel UK’s specialty steels business and its Hartlepool pipe mills were ongoing. Strong monsoons impacted steel demand across the country while the rise in domestic capacity added to the competitive pressure.
In the month of March, Tata Steel decided to put its whole UK business on the block in the face of a dip in steel demand and prices, however the plan hit a roadblock because of uncertainty stemming from Brexit.
The group eventually stopped the sale process in the month of July in favor of discussions for a JV – joint venture with strategic players in the steel industry, encompassing Thyssenkrupp. As of 30th September, 2016, Tata Steel’s net debt stood at Rs.75,563 cr.
The overall numbers were below expectations. Indian business was weak because of Kalinganagar affecting the overall mix and the Europe margin hike wasn’t as expected. Other divisions also didn’t perform well.
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