Tata Steel Limited ((IN:TATASTEEL)) has held its Q3 earnings call. Read on for the main highlights of the call.
The recent earnings call for Tata Steel Limited highlighted a mixed sentiment, reflecting both achievements and challenges. The company showcased its growth in India’s crude steel production and noted significant cost reductions that led to an improved EBITDA. However, the call also addressed concerns such as the impact of China’s high steel exports on global prices, struggles in the European market, and environmental compliance issues in the Netherlands.
India Crude Steel Production Growth
Tata Steel reported a 6% year-on-year increase in India’s crude steel production, reaching 5.69 million tons. This growth was bolstered by the commissioning of a new 5 million ton blast furnace at Kalinganagar, which contributed to increased volumes.
EBITDA Improvement
The company experienced a notable improvement in EBITDA, which stood at Rs. 7,155 crores when adjusted for FX revaluation impact. This translates to an EBITDA per ton of Rs. 9,263, marking a 30% increase over the previous quarter.
Cost Reduction Achievements
Tata Steel achieved significant cost reductions, with material costs declining by approximately Rs. 1,300 per ton due to lower coking coal consumption costs. Additionally, conversion costs, excluding royalty, decreased by about Rs. 1,678 per ton.
Neelachal Ispat Nigam Limited Performance
The performance of Neelachal Ispat Nigam Limited improved, with EBITDA margins rising from 13% in Q2 to 20% in Q3. This improvement was driven by a 17% increase in volumes and enhanced cost efficiency.
UK Fixed Cost Improvements
In the UK, Tata Steel’s operations saw a substantial reduction in fixed costs by £80 per ton quarter-on-quarter. Overall, there was an improvement of about £70 million in Q3 compared to Q2.
China’s Steel Export Surge
China’s steel exports surged to 111 million tons during the calendar year, one of the highest levels in recent history, affecting global steel prices and creating competitive pressures.
European Market Challenges
The European market faced challenges, with steel prices declining significantly. Spreads, including energy and carbon costs, reached multi-year lows, and the EBITDA for the Netherlands was neutral in Q3 compared to a £22 million positive in Q2.
FX Revaluation Impact
Tata Steel faced an FX revaluation impact due to the euro’s sharp depreciation, resulting in an impact of around Rs. 1,100 crores on inter-company loans.
Netherlands Environmental Compliance Issues
The company is dealing with ongoing environmental compliance issues at its Netherlands facility, particularly concerning coke oven emissions, which could lead to potential penalties.
Forward-Looking Guidance
Looking ahead, Tata Steel plans to focus on ramping up operations at Kalinganagar and optimizing costs across its geographies to enhance profitability despite subdued market conditions. The company remains committed to improving its financial metrics, with an emphasis on cost reduction and efficiency improvements.
In summary, Tata Steel’s earnings call reflected a balanced sentiment with notable achievements in operational efficiency and production growth, contrasted by challenges in global markets and environmental compliance. The company’s forward-looking strategy aims to navigate these challenges through strategic operational enhancements and cost management.