Tata Steel Ltd. is expected to report a sequential decline in June-quarter earnings as seasonally weaker volumes weigh on performance, though improved steel realisations across India are likely to cushion the impact. The company is expected to post higher year-on-year revenue and operating profit, with investors closely tracking the performance of its European operations when it announces results this week.
Domestic steel prices improved during the quarter following price hikes, supporting profitability despite lower shipments. Analysts expect India's operations to remain resilient, aided by better realisations and continued cost optimisation. However, softer volumes, higher coking coal costs and the seasonal slowdown are likely to result in lower quarter-on-quarter revenue, Ebitda and profit. Europe is also expected to remain loss-making, although losses are seen narrowing from the previous quarter.
The key focus this quarter will be whether Tata Steel can sustain margin expansion in India while improving profitability in Europe. Investors will watch management commentary on domestic steel demand, realisations during the monsoon quarter, cost-saving initiatives in the UK and the Netherlands, coking coal costs, as well as the potential impact of the Carbon Border Adjustment Mechanism in Europe.
Tata Steel Q1 Preview – Bloomberg Estimates (Consolidated, QoQ)
- Revenue seen 8.1% lower at Rs 58,154.7 crore versus Rs 63,270 crore (Rs 53,178.12 crore YoY)
- Ebitda seen 7.6% lower at Rs 9,077.5 crore versus Rs 9,829 crore (Rs 7,427.54 crore YoY)
- Ebitda margin seen at 16.08% versus 15.5% (14.0% YoY)
- Profit seen 5.7% lower at Rs 2,758.75 crore versus Rs 2,926 crore (Rs 2,077.68 crore YoY)
Here's what analysts expect from Tata Steel Q1 results
Kotak Institutional Equities
- Domestic steel realisations are expected to improve about 8-9% sequentially following price hikes.
- Standalone steel deliveries are likely to decline seasonally, weighing on volumes.
- India Ebitda per tonne is expected to improve on better realisations despite higher coking coal costs.
- Europe is expected to remain loss-making, though losses should narrow from the previous quarter.
- Key monitorables include management commentary on domestic demand, steel spreads, coking coal costs and European operations.
Axis Capital
- Consolidated Ebitda is expected to decline sequentially as lower volumes offset stronger pricing.
- India Ebitda is likely to rise on improved steel prices despite a mid-teen percentage decline in volumes.
- Europe is expected to report lower losses, while UK losses should moderate.
- Investors will watch the sustainability of higher domestic steel prices and improvement in overseas operations.
Goldman Sachs
- Consolidated Ebitda is expected to be driven by stronger standalone performance.
- Standalone Ebitda per tonne is likely to see the strongest sequential improvement among peers due to better realisations.
- Domestic steel sales volumes are expected to benefit from capacity ramp-up despite seasonal weakness.
- Netherlands profitability is likely to remain under pressure because of operational challenges, while the UK business is expected to narrow losses.
CLSA
- Higher domestic steel prices are expected to drive a broad improvement in profitability.
- Domestic hot-rolled coil prices increased during the quarter, supporting realisations.
- India Ebitda per tonne is expected to rise materially on better pricing.
- Management commentary on realisations during the monsoon season, volume outlook and expansion projects will be closely monitored.
ICICI Securities
- Better domestic realisations are expected to drive overall Ebitda growth despite lower volumes.
- Standalone Ebitda per tonne is likely to improve on stronger pricing and a favourable product mix.
- Europe is expected to remain loss-making because of higher costs and lower shipments, though losses should reduce sequentially.
- The key monitorables are India and Europe steel spreads, cost-saving initiatives in the UK and the Netherlands, and coking coal costs.
JM Financial
- Higher domestic steel prices are expected to lift margins despite seasonally weak demand.
- India Ebitda per tonne is expected to expand significantly on stronger realisations.
- Higher coking coal costs are likely to partially offset the benefit of better steel prices.
- India remains the key earnings driver, while Europe continues to be a drag on consolidated profitability.
Ambit Capital
- UK operations are expected to improve as fixed costs are absorbed over a better production base.
- Netherlands operations may remain weak because of blast furnace disruptions and elevated costs.
- Higher domestic realisations are expected to support consolidated profitability despite weaker volumes.
Morgan Stanley
- India volumes are expected to expand year-on-year even as sequential volumes remain weak.
- Domestic Ebitda per tonne is expected to rise on higher steel prices, partially offset by higher coking coal costs.
- Netherlands performance is expected to improve sequentially but remain under pressure.
- UK profitability is likely to improve as losses narrow further.
Essential Business Intelligence, Sharp Market Insights, Practical Personal Finance Advice, Daily Fuel, Gold and Silver Prices and Latest Stories — On NDTV Profit.
