Continuing with the trend in the last many quarters, Tata Steel reported yet another quarter of revenue decline.
Dragged down by a sharp fall in sales volumes and realisations in Europe, the company posted a 12 per cent year-on-year decline in consolidated revenue to ₹29,508 crore in the March 2016 quarter.
This was despite a 13 per cent jump in steel sales (volume) in India during the quarter, aided by the import protection offered by the minimum import prices (MIP) introduced by the Centre in February. The surge in cheap steel imports into Europe, even as demand in the region remained tepid, has hurt the company in Europe.
Lower raw material cost and reduction in maintenance expenses at the European operations where production is being cut down, however, pushed up the company’s March 2016 consolidated operating profit to ₹2,205 crore. At the net level though, it posted a loss of ₹3,214 crore.
Write-down of fixed assets, primarily at the European operations, and provisions relating to a restructuring exercise involving employees in Europe, impacted profitability.
Tata Steel operates largely in India and Europe and has a small presence in South-East Asia. The European business accounts for about 60 per cent of its consolidated revenue but is loss-making even at the operating profit level.
OutlookWith the company having kick-started the process of selling off its loss-making UK business, there should be some relief on the operational front in the current fiscal.
In April, it entered into an agreement with Greybull Partners to sell its UK long products business. It is evaluating buyers for the remaining UK businesses too.
In India, the company expects steel consumption to rise on the back of improved demand from segments such as roads, railways, power transmission and commercial vehicles. It has commenced production at its high-grade steel plant at Kalinganagar in Odisha.
The company should benefit from the full impact of the MIPs imposed in February.