Tata Steel Limited is an Indian multinational steel-making company, based in Jamshedpur, Jharkhand and headquartered in Mumbai. It is a part of the Tata Group.
Formerly known as Tata Iron and Steel Company Limited (TISCO), Tata Steel is one of the top steel producing companies in the world with an annual crude steel capacity of 34 million tonnes. It is one of the world’s most geographically diversified steel producers, with operations and commercial presence across the world. The group (excluding SEA operations) recorded a consolidated turnover of US$19.7 billion in the financial year ending 31 March 2020. It is the second largest steel company in India with an annual capacity of 13 million tonnes after Steel Authority of India Ltd. (SAIL). TATA Steel, along with SAIL and Jindal Steel and Power, are the only 3 Indian steel companies that have captive iron-ore mines, which gives the three companies price advantages.
Tata Steel group is among the top global steel companies with an annual crude steel capacity of 34 million tonnes per annum. It is one of the world’s most geographically diversified steel producers, with operations and commercial presence across the world. The group recorded a consolidated turnover of $ 32.83 billion in the financial year ending March 31, 2022.
Tata Steel operates in 26 countries with key operations in India, Netherlands and the United Kingdom, and employs around 80,500 people. Its largest plant (10 MTPA capacity) is located in Jamshedpur, Jharkhand. In 2007, Tata Steel acquired the UK-based steel maker Corus. It was ranked 486th in the 2014 Fortune Global 500 ranking of the world’s biggest corporations.
Quarterly Earnings Walkthrough
Tata Steel Ltd posted a consolidated net loss of Rs -2,502 crore for the December quarter, significantly due to a severe decline in realizations and spreads in Europe.
Steel prices have been under duress in the December quarter with a fall of 17% as compared to the previous year and 5% sequentially for flat products. Prices of long and semi-finished products were up 5% and 3% from the previous year, but fell 2% and 6% sequentially, respectively.
During the December quarter, the consolidated revenues from operations were reported at Rs 57,084 crores and EBITDA (Earnings Before Interest, Tax, Depreciation and Amortization) stood at Rs 4,048 crores, with the EBITDA margin at 7%.
International Segment
The operations of the company in Europe faced impact amidst the sharp spike in energy costs which have affected demand and profitability for steel producers. Rising interest rates have amassed fears of recession, continued by an additional stagnation in the European economies.
Tata Steel Europe reported an EBITDA loss of Rs -1,551 crore for the December quarter versus the Rs 1,788 crore EBITDA in September quarter and Rs 2,942 crore in the corresponding quarter of the previous year. European revenues were reported at Rs 20,745 crore which have fallen by 9% from the previous year and 4% sequentially.
The consolidated net profit faced the brunt by a one-time expense accompanied with the European operations. The British Steel Pension Scheme with Tata Steel UK as a sponsor has finished majority of its operation to lower risk by insuring about 60% of its liabilities. The buy-in transaction and actuarial movements have ensued in a non-cash deferred tax expense of Rs 1,783 crore and raised the overall deferred tax expense for the December quarter to Rs 2,150 crore.
Domestic Segment
The performance of the domestic segment has been acceptable. Indian steel manufacturers witnessed sensational growth during corresponding quarter in the last year supported by high steel prices and softening raw material prices, but the December quarter of this year has shown a steady decline in steel prices as the prices for raw material prices has risen.
Domestic deliveries were up by 11% from the previous year which supported the company to improve its product range and negated the decline in revenues in spite of the weak steel prices.
The company has spent Rs 3,632 crores on capex during the December quarter. At Kalinganagar, the phased commissioning of 6 MTPA pellet plant has initiated. The company is working on a 2.2 MTPA Cold Roll Mill complex and the 5 MTPA expansion is being pursued.
Technical Analysis
Tata Steel stock price has made a full retracement to the 61.8% retracement level and could not make a break over the down-trending line marked with the sky-blue colour. The price will face continued pressure and may correct down to the Rs 100 level. Traders can initiate short positions into this stock. Investors may accumulate the stock when the price is near the 200-day moving average or below Rs 100.
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