Tata Steel sees consolidated net loss of Rs 6,196 cr in Sept quarter

Tata Steel reported a consolidated net loss of Rs 6,196.24 crore in the July-September quarter on the back of impairment charges and restructuring costs due to the proposed transition in the UK.

In the year-ago period, the company had posted a net profit of Rs 1,514.42 crore.

Tata Steel’s consolidated income from operations for the quarter was at Rs 55,107 crore, down by 7.4 per cent year-on-year (Y-o-Y). The Bloomberg consensus estimate had pegged revenues at Rs 55,982.1 crore and profit at Rs 440.7 crore.

Sequentially, income from operations was down by 6.6 per cent from Rs 59,016 crore in Q1FY24. The company had posted a net profit in the previous quarter, at Rs 634 crore.

The performance in the quarter was impacted by impairment charges and restructuring cost of UK operations, which would be changing its business model from heavy-end assets to scrap-based electric arc furnace model.

In September, Tata Steel announced plans to invest in a scrap-based electric arc furnace (EAF) at Port Talbot, at a cost of 1.25 billion pounds with a government grant of 500 million pounds.

This is subject to relevant regulatory approvals, information and consultation processes and finalisation of detailed terms and conditions.

The company said it had assessed the potential impact of the electric arc furnace-based decarbonisation project and restructuring in the UK. It had taken an impairment charge of Rs 2,746 crore in consolidated financial statements and Rs 12,560 crore in standalone financial statements.

The company has also taken a charge towards restructuring and other provisions of Rs 3,612 crore in consolidated financial statements.

The company said that it had recorded a provision of Rs 2,425 crore during the quarter towards restructuring costs (including potential asset closures and redundancy costs).

Media reports had suggested that Tata Steel was likely to announce ‘thousands’ of job cuts. That prompted Unite, a union in the UK, to urge the government to intervene immediately by taking a stake in the UK steel industry.

The union condemned the consideration of mass redundancies and said “we do not accept the need for one single job cut.”

The company mentioned in its results filing that it had initiated informal discussions with trade union representatives in September 2023, explaining the impact of the restructuring proposal.

Koushik Chatterjee, executive director and chief financial officer, said, “Given our plans to change the processed route for steelmaking, the existing heavy end assets at TSUK will only be used for a defined period.”

“Accordingly, we have taken an impairment charge of Rs 12,560 crore in the standalone financial statements. We have also taken a charge of Rs 6,358 crore in consolidated financial statements in relation to the UK business,” he added.

Tata Steel’s consolidated earnings before interest, taxes, depreciation, and amortisation (EBITDA) margins stood at 8 per cent while in India it was higher at around 20 per cent.

T V Narendran, chief executive officer and managing director, said Tata Steel India delivered steady performance, with crude steel production of around 5 million tonnes. “Domestic deliveries were up 6 per cent Y-o-Y, despite renewed volatility and seasonal factors during the quarter.”

He also said that in the Netherlands, Tata Steel would shortly be submitting a detailed decarbonisation proposal to the Dutch government, seeking regulatory and financial support.