News

Published: Feb 9, 2023
Updated: Feb 9, 2023

Tata Steel Incurs Surprising Q3 Loss of Rs 2,224 crore

Tata Steel has reported a consolidated net loss of Rs 2,223.84 crore in Q3 of the financial year 2023. The loss was caused by a decline in realisations in Europe and a non-cash deferred tax expense on the British Steel Pension Scheme. The company's consolidated revenues from operations for the quarter were Rs 56,756.61 crore, a 6.2% decrease from the previous year.

Revenue and Profit Miss Estimates

Tata Steel's revenue for the quarter was in line with estimates, but the net loss came as a surprise to analysts. The Bloomberg consensus estimate had predicted a revenue of Rs 56,689.9 crore and a net income of Rs 1,699.1 crore. The company's previous quarter's revenue was Rs 59,512.54 crore with a net profit of Rs 1,514.42 crore.

Europe Delivers Lower Steel Demand

T V Narendran, CEO and Managing Director of Tata Steel, stated that Europe's steel deliveries have been lower due to a slowdown in demand. Recession fears and high energy costs have had a negative impact on steel prices and Tata Steel's performance.

British Steel Pension Scheme's Impact

The British Steel Pension Scheme (BSPS), with Tata Steel UK as the sponsor, has made substantial progress in its de-risking journey, insuring 60% of its liabilities. This resulted in a non-cash deferred tax expense of Rs 1,783 crore for the quarter, increasing the overall deferred tax expense to Rs 2,150 crore.

Steady Growth in India

Tata Steel recorded a net profit of Rs 2,705.13 crore on a standalone basis, compared to Rs 7,683.39 crore in the same period the previous year. Domestic deliveries in India were up 11% YoY for the quarter and 4% YoY for the first nine months of the financial year. The company's crude steel production reached 5 million tonnes in Q3 in India.

Subdued Steel Prices in India

In India, steel prices were subdued, but raw material costs moved lower. This increased margins at standalone operations from 16% in Q2 to 18% in Q3. However, European operations faced margin compression due to lower realisations and high input costs. The company is investing in capacity growth in India, with a capital expenditure of Rs 9,746 crore for the year to date.

BSPS Continues to Make Progress

Tata Steel's Executive Director and CFO, Koushik Chatterjee, stated that further progress has been made on the BSPS by expanding insurance coverage from 30% to 60%. The residual insurance of 40% of liabilities is expected to be completed in H1 2023, resulting in a non-cash deferred tax expense.

Performance in India remains steady

Tata Steel has reported a surprising net loss in Q3 of the financial year 2023 due to a decline in realisations in Europe and a non-cash deferred tax expense on the British Steel Pension Scheme. However, the company's performance in India remained steady, with domestic deliveries and crude steel production increasing. The company is investing in capacity growth in India and making progress on the British Steel Pension Scheme.