Tata Steel redirected sales to global markets in the first fiscal quarter through June (FQ1) when the Covid-19 lockdown paralysed Indian domestic demand, hitting 1.46 million tonnes of exports. The steelmaker has since lifted capacity utilisation to 95% and reduced exports as domestic demand is improving.
Demand in the September quarter has so far been “…much better” than a typical monsoon quarter, Tata says, adding that the price outlook continues to improve.
The export surge in FQ1 helped limit the decline in Tata Steel India’s sales to -26% on-year and -27% on-quarter, compared to the -55% on-quarter drop in overall Indian steel demand, the producer says. Deliveries totalled 2.93 million tonnes. Revenue fell -40% to INR 12,689 crores ($1.7 billion) and profit after tax was down -74% to INR 411 crores.
India average steel realisations were lower due to the Covid-19 impact in FQ1. About INR 2,000 crores of costs were under absorbed due to the lower volumes and have been charged to the profit and loss account.
“During the quarter, we recalibrated our operations and our sales across geographies in line with underlying regulatory and market conditions,” Tata Steel chief executive TV Narendran says in a report seen by Kallanish. “While this had an adverse impact on our volumes and our margins, we were successful in mitigating the impact as we pivoted the business towards export markets and successfully generated free cashflows despite adverse market conditions.”
“We are further ramping up capacity utilisation and increasing domestic sales which will lead to an improvement in our margins in coming quarters,” he continues. “While the risk of further Covid-19 outbreaks remains, we are cautiously optimistic that the worst is behind us.”
Tata Steel’s consolidated sales fell -22% in FQ1 to 4.93mt, with revenue down -32% to INR 24,289 crores and the firm turning to a net loss of INR 4,609 crores versus a profit of INR 695 crores a year earlier.
Tata Steel Europe performance was affected by the overall weakness in economic activity in Europe. “Spreads are at unsustainably low levels but are expected to improve going forward,” Narendran says of Europe. The company received short support from the UK and Netherlands governments in FQ1, including cash flow deferrals of payables.