Ebitda fell by a sharp 40% at Rs 4,669 crore, but was ahead of estimates
Tata Steel on Monday posted a higher than expected consolidated net loss during the January-March quarter at Rs 1,236 crore. The company had reported a net profit of Rs 2,353 crore during the same period last year. The company reported exceptional items loss of Rs 3,406 crore, which was primarily due to an impairment of non-current assets.
Tata Steel was able to meet the street expectations on the consolidated revenue front at Rs 33,770 crore during the period, but it was lower by 20.4% compared to the same period last year. The Ebitda (earnings before interest, tax, depreciation and amortisation) fell by a sharp 40% at Rs 4,669 crore, but was ahead of estimates. Consequently the company’s Ebitda margins came in at 13.82%, down by 447 basis points.
The company’s Ebitda per tonne on a consolidated basis declined to Rs 7,183 crore versus Rs 10,325 in the January-March 2019. On a consolidated basis, the company reported a decline of 13.56% in the steel deliveries on a year-on-year basis. India steel deliveries declined by nearly 15% to 4.03 million tonnes during the quarter due to the nationwide lockdown in late March 20. The steel maker’s gross debt at end of March 31, 2020 stood at Rs 1,16,328 crore while net debt was Rs 1,04,779 crore.
Tata Steel expects global steel demand to be sharply lower in 2020 due to the outbreak of Covid-19. Given the uncertain business environment, capex is being curtailed sharply and restricted to safety and sustenance projects. The capex plans will be revisited in the second half or when business conditions normalise, the company said. While the capex stood at about Rs 9,500 crore in FY20, the FY21 is expected to be at least 50% lower.
In notes to the profit and loss statement, the company said its operations were severely impacted due to Covid-19 related lockdowns. In view of such lockdowns, operations at the Group’s steel making facilities in India have been scaled down from the end week of March 2020.
TV Narendran, CEO and managing director, Tata Steel, said, “The financial year 2019-2020 has been a challenging year. The Indian economy slowed down in the first half with key steel consuming sectors like automotive contracting sharply. While the economy began recovering in the second half, the outbreak of Covid-19 in end March led to unprecedented disruption and heightened economic uncertainty. We have recalibrated our operations in line with the evolving business environment and are focused on conserving cash while actively derisking the business”.
Koushik Chatterjee, executive director and chief financial officer, Tata Steel, said, “Given the heightened uncertainty due to the Covid-19 pandemic, we are focused on conserving cash and ensuring adequate liquidity to face potential disruptions in the operating environment. We also raised additional funds of Rs 4,900 crore to build a contingency buffer. Our liquidity at the end of the year remained robust at Rs 17,745 crore including cash and cash equivalents of Rs 11,549 crore.”
The Group’s overseas operations in Europe, South East Asia and Canada have also been scaled down over various periods and are being operated as per the local guidelines, wherever permitted.
The lockdown has adversely impacted the group’s sales volume, mix and realisations in the various geographies it operates. During the current quarter, such impact was limited only to the later part of March 2020.
However, with the continuance of such lockdown during the first quarter of the financial year 2021, the group’s operation remained adversely impacted.
At the company’s European business, the revenue from operations decreased to Rs 55,939 crore in FY20 primarily due to sharp decline in European steel prices and lower deliveries, resulting in loss of Rs 664 crore at Ebitda level. In 4QFY20, revenues declined by 2% sequentially to Rs 13,588 crore while Ebitda improved to Rs 65 crore compared to Ebitda loss of Rs 956 crore in Q3FY20.