Tata Steel Ltd. reported a 92% decline in quarterly profit as it continues to grapple with weakness in its European operations despite better performance at its Indian business.
(Bloomberg) — Tata Steel Ltd. reported a 92% decline in quarterly profit as it continues to grapple with weakness in its European operations despite better performance at its Indian business.
Group net income was 6.34 billion rupees ($78 million) during April-June, down from 77.65 billion rupees a year earlier, it said in a statement Monday. That was better than analysts’ average estimate for a loss of 2.18 billion rupees. Sales fell 6.2% from a year earlier to 594.9 billion rupees.
Profitability was also affected by a non-cash charge for deferred taxes on account of the British Steel Pension Scheme, it said in the statement. “With this, the insurance buy-in of BSPS has been completed, successfully derisking Tata Steel UK,” it added.
Lower cash flows would make it tougher for the company to work on its goal of paring debt and add new capacity. The steelmaker’s European production for the three months ended June fell 26% from a year earlier, and deliveries declined about 8%. Tata’s crude steel output in India rose about 2% from a year earlier, while deliveries climbed 18% on year.
“During the quarter, global economic recovery continued to face headwinds affecting commodity prices including steel,” Chief Executive Officer T.V. Narendran said in the earnings statement. “In India, domestic steel demand continued to grow and was up around 10% on year-on-year basis but steel spot prices moderated in line with global cues.”
Volatility in steel markets impacted working capital and cash flows but Tata Steel continues to commit to growth in India, spending 40.89 billion rupees in capital expenditure during the quarter, Chief Financial Officer Koushik Chatterjee said. That led to a net debt of 713.97 billion rupees as of the end of June, he said.
The company’s shares ended 0.9% lower in Mumbai, before the results were published. Analysts have 25 buy recommendations on the stock, 4 holds and 3 sells, according to data compiled by Bloomberg.
(Updates with details and management comments throughout.)
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