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Tata Steel slips into red, posts Rs 1,615.35 cr loss in Q4

Mumbai, Jun 29 (PTI) Decline in demand coupled with a significant fall in deliveries due to the COVID-19 pandemic-induced lockdown pushed domestic steel major Tata Steel into red as the company reported a net loss of Rs 1,615.35 crore for the quarter ended March 31.

The company, which had reported a net profit of Rs 2,295.25 crore a year ago, said it has decided to calibrate its operations and focus on conserving cash and ensuring adequate liquidity to face potential disruptions in the wake of COVID-19 pandemic created uncertainty.

Its total consolidated income fell to Rs 35,085.86 crore in January-March 2020 from Rs 42,913.73 crore in the same quarter of preceding fiscal, it said in a regulatory filing.

'FY20 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,' Tata Steel Managing Director and CEO TV Narendran said.

He further said that in the wake of the uncertain environment, the company has decided to recalibrate its operations and focus on conserving cash while actively de-risking the business.

During fiscal year 2019-20, the company's revenue from operations declined to Rs 1,39,817 crore from Rs 1,57,669 crore in FY19, while its profit after tax from continuing operations for the year fell to Rs 2,337 crore from Rs 9,187 crore in 2018-19.

'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 have pivoted business decisions on cash flows and successfully driven cash neutrality in our operations by reducing spend, managing working capital and curtailing capital expenditure,' Tata Steel Executive Director and CFO Koushik Chatterjee said.

He further said the company raised additional funds of Rs 4,900 crore during the year to build a contingency buffer, while the liquidity at the end of the year stood at Rs 17,745 crore, including cash and cash equivalents of Rs 11,549 crore.

'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 of the current fiscal or when business conditions normalise,' Chatterjee said.

The company's domestic steel production grew 8 per cent YoY to 18.20 million tonnes in FY20 with ramp up at Tata Steel BSL and acquisition of Usha Martin's steel business by Tata Steel Long Products.

Steel deliveries grew by only 4 per cent per cent to 16.97 million tonnes during the year due to the nationwide lockdown in late March 2020. Branded products and retail segment achieved an 8 per cent year-on-year improvement in volumes to 5.32 million tonnes.

'While deliveries in India were marred by the nationwide lockdown in late March 2020, margins improved on the back of stronger performance in the early part of the quarter. Both our acquisitions, Tata Steel BSL and Tata Steel Long Products continue to deliver improvements in operating KPIs which has translated into better profitability,' Narendran said.

During the year, the company's revenue from European operations decreased to Rs 55,939 crore, primarily due to sharp decline in European steel prices and lower deliveries as compared to FY19.

'However, on a quarterly basis, Tata Steel Europe showed a turnaround in performance with positive EBITDA during January-March. While there will be a sharp drop in volumes in 1QFY21, we are seeing early signs of recovery and remain poised to leverage our position on normalization of business conditions,' he added.

On manufacturing, Narendran said production in India had picked up to 80 per cent during May after the government relaxed lockdown norms after April 20, and is likely to reach 100 per cent by June end.

'There are early signs of a recovery in steel demand on the back of increased spending on infrastructure projects as well as rural demand. In Europe, Tata Steel Europe continues to operate at about 70 per cent utilization level. Key steel consuming sectors such as the automotive and construction sector continue to be adversely affected, though demand for packaging material has seen a sharp upsurge,' he said.

On reports of Tata Steel's UK arm seeking an estimated 500-million pounds government financial package to survive through the coronavirus lockdown period, Narendran said the company is in conversation with the government, but it is too premature to say in what discussions it is in for the support.

When asked about the call for 'Atmanirbhar Bharat' and anti-China sentiments, he said, 'Since the last many years, China has not been a cause of concern, but the imports from Japan and Korea. We did fear large exports from China post-Covid but that has not happened. On the contrary, China is importing steel which is helping Indian steel companies to have a demand supply balance in the Asian market.' On South East Asian operations, Narendran said the company continues to engage with strategic players for its divestment, but the outbreak of COVID-19 has delayed the process The company's expenses stood at Rs 33,272.29 crore during the quarter under review as against Rs 38,728.87 crore in the year-ago period.

Its gross debt stood at Rs 1,16,328 crore, while net debt was at Rs 1,04,779 crore as on March 31.

Shares of the company on Monday closed 0.82 per cent lower at Rs 321.25 apiece on the BSE. PTI PSK ABI RVK