Tata Steel suffered losses in the third quarter because of a weak performance of its European operations, which bore the brunt of an overall economic slowdown even as it reported shrinking of spreads. The company recorded a loss of Rs 1,229 crore on a consolidated basis in the December quarter compared with a profit of Rs 1,753 crore in the same period last year, despite deliveries growing 12.9 per cent to 7.31 million tonnes.
The squeeze in spread was evident as total revenue from operations reduced 8.5 per cent to Rs 35,520 crore in the quarter despite a rise in deliveries.
Indian operations of Tata Steel, which is vertically integrated with captive iron ore reserves — the primary raw material for steel — also betrayed signs of the slowdown in the domestic market.
Profit after tax came down to Rs 1,804 crore in the third quarter compared with Rs 2,456 crore in the same period last year, a decline of 26.5 per cent. Revenues from operation also declined by 11.1 per cent to Rs 15,262 crore from Rs 17,174 crore.
The stress on the European operations was also reflected in the October-December performance of ArcelorMittal on Thursday, highlighted the commentary from the top management of Tata Steel.
“Tata Steel delivered strong growth in volumes despite poor macroeconomic conditions in India as well as globally. We were also able to maintain our sales to the auto segment despite the sluggishness faced by the auto industry. Both our acquisitions, Tata Steel BSL and Tata Steel Long Products (Usha Martin’s steel business), continue to deliver operational improvements and achieve milestones in the market place. However, our European operations made a loss as it felt the brunt of the overall slowdown and the consequent shrinking of spreads. This adversely affected our consolidated performance,” CEO and managing director T.V. Narendran said in a statement.
The company also took the same path as ArcelorMittal to point out that it used free cash flow to pare debt.
“During the quarter, we succeeded in delivering working capital improvements which helped in generating cash flows in excess of Rs 6,000 crore. This helped us reduce our net debt during the quarter by Rs 2,324 crore,” Koushik Chatterjee, executive director & CFO of Tata Steel, noted.
