Tata Steel posts surprise Rs 2,224 crore net loss in December quarter

Tata Steel reported a consolidated net loss of Rs 2,223.84 crore in the December quarter (Q3FY23) on the back of a sharp drop in realisations in Europe coupled with a non-cash deferred tax expense on account of British Steel Pension Scheme. In the year-ago period, the firm had posted a net profit of Rs 9,572.67 crore.

Consolidated revenues from operations at Rs 56,756.61 crore were down 6.2 per cent from Rs 60,524.72 crore in the year-ago period, but in line with estimates. The loss, however, came in as a surprise. A Bloomberg consensus estimate had pegged revenues at Rs 56,689.9 crore and a net income at Rs 1,699.1 crore.

Ahead of the results, the Tata Steel stock closed at Rs 117.60 on the Bombay Stock Exchange, down 2.08 per cent.

In the previous quarter, consolidated revenues had stood at Rs 59,512.54 crore and the net profit was Rs 1,514.42 crore. Total expense during the quarter stood at Rs 57,172.02 crore compared to Rs 48,666.02 crore a year back.

Commenting on the performance, T V Narendran, chief executive officer and managing director, Tata Steel, said that Europe deliveries were lower in 9MFY23 due to slowdown in demand.

“Recession concerns weighed on steel prices, which coupled with elevated energy costs affected our performance,” he said.

Further, the company said the British Steel Pension Scheme (BSPS) with Tata Steel UK as sponsor had completed a substantial part of its de-risking journey with 60 per cent of its liabilities insured.

The buy-in transaction along with actuarial movements resulted in a non-cash deferred tax expense of Rs 1,783 crore and increased the overall deferred tax expense for the quarter to Rs 2,150 crore.

On a standalone basis, Tata Steel recorded a net profit of Rs 2,705.13 crore as against Rs 7,683.39 crore in the year-ago period. Narendran said in India, Tata Steel delivered steady growth in volumes despite the volatile operating environment.

Domestic deliveries, he said, stood at about 13.7 million tonnes (mt) in the first nine months of the financial year and were up 4 per cent YoY. For the quarter, they were up 11 per cent YoY.

Tata Steel’s crude steel production touched 5 mt in 3QFY23 for the first time in India, with Neelachal Ispat Nigam limited commencing operations.

Koushik Chatterjee, executive director and chief financial officer, said that in India steel prices were subdued even as raw material costs moved lower.

“While this increased margins at standalone operations from around 16 per cent in 2Q to 18 per cent in 3Q, European operations witnessed margin compression due to lower realisations and elevated input costs,” he said.

The company is investing in capacity growth in India and the capital expenditure for the quarter, he mentioned, was at Rs 3,632 crore and Rs 9,746 crore for the year to date; net debt on QoQ basis at Rs 71,706 crore remained broadly stable, he added.

On BSPS, Chatterjee said, further progress had been made by expanding insurance coverage on liabilities from 30 per cent to 60 per cent.

“Depending on market conditions, the residual insurance of 40 per cent of liabilities will be completed in the first half of the calendar year 2023 and there will be a commensurate non-cash deferred tax expense,” he added.