Tata Steel Says Worst Is Over After Q1 Results, Expects A Better Q2

Tata Steel Ltd. said that the worst is behind it, and expects performance to improve in the second quarter of the ongoing fiscal.

India’s oldest steelmaker, which reported its lowest operating profit in 18 quarters in the three months through June, is looking to improve its operational metrics. That, according to Managing Director TV Narendran, can be achieved by higher realisation, cutting costs, increasing free cash flow, and either paring its consolidated debt or maintaining it at existing levels.

The company doesn’t expect loss in its European division to accelerate in the second quarter as it continues to seek support from the European Union and U.K., he said at a call with investors.

“A significant uptick in demand has been observed in automobile sales, with recovery improving on a month-over-month basis since June,” he said, adding that there’s room for price hikes in July-September quarter.

Koushik Chatterjee, the steelmaker’s executive director and chief financial officer, said it will review its debt position in the second half of the ongoing financial year and take a call accordingly.

Key Highlights

• Recovery in steel prices and demand has been faster than expected.
• Current pricing still below pre-pandemic levels; expect more hikes in Q2.
• European division bottomline in Q2 is expected to be similar to Q1.
• Domestic realisations to be higher by Rs 3,000 per tonne sequentially in Q2.
• Prices of hot-rolled coil steel prices have risen by $100 over in the last three months.
• Domestic market is re-stocking; auto sector is reviving.
• Demand-supply situation in India is balanced on reduced inventory level.
• Overall India sales volumes in June stood at 115% of FY20 average monthly deliveries.
• Steel prices have been defying monsoon trends.
• See further room for upside in European steel prices.
• European stimulus will have positive impact on Tata Steel’s European division.
• Expect things to get better in Q2; European division challenges will remain to extent.
• Have curtailed capex to below or at Rs 5,000 crore for FY21.
• Will revisit capex plans in H2FY21.

On Friday, Tata Steel shares rose 0.45% to Rs 55.50 apiece on the BSE while the benchmark Sensex ended the day 1.13% lower at 37,877.34 points.