Tata Steel Q1 Results: Profit Plunges Nearly 92% On High Inventory Loss

Tata Steel Ltd.'s net profit declined in the first quarter of FY24, though it beat analysts' estimates.

The steelmaker's net profit fell 91.8% year-on-year to Rs 633.95 crore in the quarter ended June, according to an exchange filing on Monday. That compares with a net loss of Rs 122.3 crore estimated by analysts tracked by Bloomberg.

Tata Steel Q1 FY24 Highlights (Consolidated, YoY)

• Revenue down 6.2% at Rs 59,489.6 crore versus Rs 63,430.07 crore (Bloomberg estimate: Rs 56,337.8 crore).

• Net profit down 91.8% at Rs 633.95 crore versus Rs 7,764.96 crore (Bloomberg estimate: loss of Rs 122.3 crore).

• Ebitda down 65.45% at Rs 5,173.82 crore versus Rs 14,972.8 crore (Bloomberg estimate: Rs 5,050.5 crore).

• Margin at 8.7% versus 23.61% (Bloomberg estimate: 9%).

Net profit dropped on account of a Rs 9,500 crore increase in inventory costs, partially offset by an 8% year-on-year growth in consolidated steel volume to 7.04 million tonne.

This increase in inventory cost was primarily due to inventory drawdown in its Europe segment. Consumption of high cost coking coal, resulting from an inventory lag, has also driven the cost of inventory higher.

Segment Ebitda (YoY)

• Tata Steel's India operations registered a 23.58% decline to Rs 7,347 crore.

• Europe operations witnessed an operating loss of Rs 1,569.15 crore, as compared with a profit of Rs 6,036 crore.

• Tata Steel Long Products' operating profit rose to Rs 165 crore versus a loss of Rs 33.8 crore.

• Southeast operations dropped 82% to Rs 54 crore.

• The rest-of-the-world operations improved with a profit of Rs 27.1 crore versus Rs 35.6 crore last year.

Consolidated Ebitda per tonne declined 64.6% YoY to Rs 8,116 per tonne.

Tata Steel India's revenue grew by 1% YoY, weighed down by lower realisations as India sales volume rose 17.9% YoY to 4.8 million tonne in Q1 FY24.

The weaker demand pickup in Europe has led to a 17.8% YoY drop in revenue in this geography, driven by a 7.9% fall in delivery volume to 1.97 million metric tonne. Crude steel production fell by 25.8% YoY to 1.81 million tonne, on account of the commencement of the relining of a blast furnace at Tata Steel Netherlands in April.

Tata Steel Europe's profitability was affected by a non-cash deferred tax charge, on account of buy-in transaction at British Steel Pension Scheme, causing a Rs 7,600 crore drop in its operating income. However, the insurance buy-in of BSPS has been completed in this quarter, which has completely derisked Tata Steel U.K., the primary sponsor of the pension scheme.

"We continue to progress on our sustainability journey, and multiple initiatives are underway, calibrated to each operating location," said TV Narendran, chief executive officer and managing director at Tata Steel. "We are also engaged in discussions with technology providers and the government for transitioning to greener steel."

Shares of Tata Steel closed 1.16% lower on Monday ahead of the first quarter results, as compared with a 0.37% decline in the benchmark Nifty 50.